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| Towards a new financial order | | | Shivaji Sarkar | 7/16/2015 12:09:42 AM |
| The initiative by Brics nations to forge
closer and deeper economic ties and have
a bank of their own has the potential to challenge the Bretton Woods monetary management system which had for decades largely helped the more developed West Prime Minister Narendra Modi's condemnation of the Western high-handedness and his call to end sanctions against Russia, marks the beginning of global 'United Nations and Bretton Woods systems' institutional reforms. It may lead to the end of the centuries of colonial one-upmanship, if not atrocities in the rest of the world.The Brazil-Russia-India-China- South Africa seventh summit coincided with the release of the 2015 UN Millennium Development Goals. It records an abysmal poverty record. Over 1.7 billion remain without sanitation, 75 per cent children are undernourished, 1.4 billion live below two dollars a day (many at $1.25). There has been an increase in deprivation and gender discrimination. The report speaks of veiled rise of discrimination and strife because of certain religious intolerance. Directly or indirectly many of these issues were the base for the Brics discussion. The International Monetary Fund also announced the slowing down of the global economy (largely Western) as the summit was on. Was it routine or deliberate psychological war to unnerve and desist the new five powers? The world knows that the IMF failed in checking currency speculation. Just before the summit, the United States also started talking to Iran for ending sanctions and engaging with it closely. Is the US taking note of closer interaction among the emerging economies - three of them, neighbours: India, Russia and China?
The Brics summit has lessons for the West. The Western hegemony has not helped the rest of the world. Its financial institutions, even the UN mechanism, could not bring a better world order. The ganging up of the West ensured that, whatsoever the condition of their economies, the US dollar, the European euro and the British pound would control the exchange mechanism and manipulate rates of currencies. It makes the poor nations subsidise rich economies as they get peanuts for their products because of poor currency rates. Eventually, it has increased deprivation in the developing world. The purpose of Brics is to change that. The member countries are pro-actively promoting mutual trade in their national currencies. This can reduce the dominance of the dollar gradually. Subconsciously, the inspiration has been taken from the Greek crisis. Greece did well till it had its own currency, drachma, and slid after adopting the euro. It will take some time for the Local Currency Trade to succeed. Brics has to work out the initial hiccups of deciding the exchange rates. It is to be seen how it helps the rupee regain its position as also how it vies with the Chinese yuan-renminbi. Today one yuan is priced at a little more that `10. As it succeeds, the rupee-trade area is likely to engulf a large part of Central Asia, Russia, China and maybe at a later stage, Southeast Asia. The domination of the money market by the West virtually made all other currencies pariahs. The five diverse economies deciding to trade in their own currencies is an attempt to end monopolies. It is an honest, pro-people but difficult move. The West would sharpen its barbs and Brics may not find it easy to duck at least in the near future. The New Development Bank, that has been set up by Brics members, and the Asia Infrastructure and Investment Bank, will gradually create the arsenal for freeing these economies. The NDB has been welcomed widely and is opening up membership. Its chairman,, Kundapur Vaman Kamath, says, "If the board approves, it could consider helping even Greece".The $100 billion Contingency Reserve Agreement will provide additional liquidity protection to the member countries, during balance of payment problems. China has contributed $41 billion, India, Russia and Brazil $18 billion each and South Africa has put in five billion dollars. What Brics is doing for an alternative to the Bretton Woods bodies, has in many ways been done by Andean nation in the 1960s, with the Corporación Andina de Fomento or the Development Bank of Latin America. The Chiang Mai Initiative in 2000s by the Association of Southeast Asian Nations; China, South Korea and Japan. The BancoSur or the Bank of the South by South American countries. The rising economic strength of the Brics countries has helped them gain attention at the World Bank and the IMF. The South-South Economic Cooperation has expanded dramatically in recent years. Brazil now has more embassies in Africa than does the United Kingdom. China has become Africa's most important trading partner. The value of the South-South trade now exceeds North-South trade by some $2.2 trillion, over one-quarter of global trade. Low-income countries have also seen unprecedented growth in the 'South-South' foreign aid - with China, Brazil, and India all becoming larger donors. So, these Brics institutions are a part of the process of greater economic engagement by and among developing nations. The concern of the West is reflected, the way Western news agencies have covered the Brics summit. The overtone is that, with diverse economies coming together from different regions, its success is suspect. They overlook the capacity to manage common issues like cyber, climate and energy arenas, and they even ignore that the Brics sub-group of India, Brazil, China and South Africa on climate change is likely to play a crucial role in the UN Climate Change Conference in December. Besides, Brics countries can resolve bilaterally, issues like military intervention, sanctions, terrorism, investment and the UN Security Council changes.
There are many other emerging common interests. What Brics has ignored so far is to have its own information order. The West-based system injects bias in news presentation. It needs to set up a strong news dissemination system beyond their national agencies. A pool of national agencies does not succeed. It has to consider setting up a global agency to counter Western propaganda for the success of the new reforms agenda.Yes, there are some problems.
Trade among Brics nations is less than $320 billion. Their trade with the US and the European Union is 6.5 times higher. In many areas, the five countries compete for a share in the markets, from apparel to aircraft and military equipment. Despite this, the union of Brics is a positive move. Whatever doomsayers say, trade among Russia, China and India has increased. This has the potential to change the course of the global economy in ways unimaginable.
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