Three reactions to the BRICS (Brazil, Russia, India, China, South Africa) New Development Bank, announced a few months ago, have been prominent. The news was received by conservative western economists and policy advisors as an unwelcome competitor to the World Bank and IMF. By some within left politics, its arrival was interpreted as beneficial. Fidel Castro in particular wrote favourably of the bank for its potential to assist the development of third world countries. Others regard the new bank as just another entrant that will exploit the developing world through finance capital. The more complicated reality is that the new BRICS bank, as important as it is, is exclusively neither one nor the other; it is, to some degree, all three combined.
The BRICS bank has arrived at the time of a retreat of US hegemony across the world. It is one more in a series of setbacks to US power that has become vulnerable and unsustainable from overreach, having spread thinly across all the regions where it wielded influence. From Latin America to Eastern Europe, from the Middle East to Asia, the signal provided by economic and political developments is the same: the unipolar world of the past 25 years is already coming to an end. In a multipolar world, countries will have more freedom, more choice and more flexibility in trade, diplomacy and development, which is a desirable state of affairs.
Meanwhile, the relationships between the BRICS countries grow ever stronger. Just a few months ago, for example, Russia and China signed a historic gas supply deal worth $ 400 billion in trade. The new bank takes the collaboration of the BRICS countries that collectively compete with the US for markets to another level. Initially intended to provide a shared pool of funds for infrastructure development and credit security for the members, it will eventually open up financing for other countries. The reliance of developing countries on the BRICS bloc will increase, while their reliance on the traditional western powers will decrease in proportion. The assessment that the BRICS bank represents a counterweight to US hegemony is, therefore, correct.
The new bank has the potential to weaken the ability of the US to control the politics and economies of other countries via the IMF and World Bank. The BRICS joint statement was as much a political statement for the member countries as it was a description of the bank’s functional purpose. For example, the clause on the importance of state-owned enterprises (SOEs) must surely have been inserted by China, contrasting with the conditions for market reform that come with IMF financing. The joint statement covers positions on everything from securing a two state solution to the Israel-Palestinian conflict to urgently finding a solution for preventing environmental catastrophe. Altogether, their political stances represent a fundamentally different worldview from that of the western countries. The new bank will be a means for advancing a political agenda for the BRICS countries in the way that the IMF and World Bank fulfil a political agenda for the US.
The political differences will also impact the conditions for financing provided by the new bank. Countries could have an alternative where, for obtaining finance, they will not be bound to implement the disastrous privatisation reforms that come with IMF and World Bank loans. They will be able to pursue independent paths of development instead of following a path dictated by the west. Therefore, the assertion that the new bank will do nothing more than jeopardise the economic and political independence of underdeveloped countries is not true.
On the other hand, it would be a mistaken assessment that a new era of anti-imperialist opposition to US hegemony has dawned, as some theorists on the left might be tempted to assume. The BRICS countries remain firmly invested in the IMF, World Bank, World Trade Organisation and the G-20. With the exception of Russia, which now faces sanctions, they maintain profitable business ties with the US that drive their own market-oriented growth. The fact that economic ties are reinforced even as geo-political rivalries increase precludes a radical transformation of relations in the near future. The deep assimilation of the BRICS countries into all the aforementioned organisations moreover makes them accomplices to the destructive policies that have been enforced on underdeveloped countries over the years. Without a fundamental rupture of the BRICS bloc from these organisations and a restructuring of their own political economies towards egalitarian, non-exploitative models that do not principally depend on foreign capital for growth, their antagonism with the Bretton Woods institutions will not constitute anti-imperialism since they will continue to be integrated with them.
The participation of the BRICS countries in the IMF and World Bank, even as the rival bank is introduced, is expected to continue. Brazil President Dilma Rousseff’s public comment that the new bank will not compete with them, but complement them, should not be taken lightly. One of the most important factors behind the formation of the new bank was the unresolved complaint of the BRICS countries that the US and Europe are overrepresented in their power to decide rules and financing terms in the IMF and World Bank. If these grievances are addressed by the US, which owns the decisive, controlling share in those institutions, the political will and economic support behind the BRICS bank can diminish. Left theorists should therefore keep their expectations for an enduring economic alternative in the BRICS bank realistic.
The BRICS bank will serve more as a front-line instrument in the competition for markets than as a humanitarian agency for underdeveloped countries. The dispute that broke out in Ukraine over it joining either the European Association Agreement or the Russian-led Customs Union, was a violent conflict between the monopolies of Russia and Europe for control over markets. Another example is Brazil, with a powerful agro-mineral extraction industry that depends on demand from the Asian economies. Facing an economic recession, Brazil’s mining giants look towards Africa for rejuvenation, where the country has more embassies than the UK and where, incidentally, mineral resources are abundant. Financing from the bank will thus prepare the domestic monopolies of the BRICS countries for international expansion by providing infrastructure and credit to compete with the monopolies of the west. This public money may end up benefiting private corporations more than projects that fix wealth disparities and poverty for the three billion people who live in BRICS.
Given these realities, the development of the multipolar world led by BRICS will not proceed in a linear fashion. But with all its nuances considered, it is nothing less than an earth-shattering change.
The writer is a business professional based in the US