As the coming BRICS Summit will occur amidst a faltering world economy, the emerging world is pressing for change, and the advanced world will cling to the past.
Much has changed since the previous BRICS Summit. During the past year, the United States has lost its triple-A sovereign credit ranking. Meanwhile, the 1.5 percent growth in the Eurozone has turned into still another recession. In turn, Japan has had “two lost decades.”
The BRICS economies are not immune to the challenges of the advanced economies, through trade, financial, migratory and growth channels.
Wealthy but stagnating economies do not like change. They would like to retain the world as it is. Poorer but rapidly-growing economies embrace change. They would like to realize the world as it could be.
In the long run, both need each other. But advanced economies will seek to retain the status quo, while history will be fueled by the large emerging economies.
Development of, by and for Developing Countries
In New Delhi, the leaders of the BRICS nations of China, India, Brazil, Russia and South Africa have been discussing the world economy and closer coordination.Among other things, they will look closer at creating a joint development bank to coordinate their financial power. While the talks over the proposed multilateral bank remain in the early stages, such a global tool would enhance coordination among the BRICS.
Most importantly, there is a vital need for a development bank of the developing countries, by the developing countries, for the developing countries.
Even though economic growth is shifting toward the large emerging nations, proposed reforms in multilateral international organizations proceed slowly.
Advanced economies are reluctant to give up their entrenched positions in the International Monetary Fund (IMF), World Trade Organization (WTO), World Bank and other organizations, which were founded after World War II. As a result, the nations that guide the world economy no longer fuel global growth.
Since the postwar era, the top IMF job has gone to a European, just as the World Bank has been led by an American. In the past, the BRICS were assured that “things will change.”
The realities are different.
No Voice, No Justice
Last year, Mexico’s central bank chief, Agustin Carstens, campaigned for the top post at the IMF, but failed to get adequate support. As a result, the top IMF job went to former French Finance Minister Christine Lagarde.
Next June, Robert Zoellick, who has headed the World Bank since July 2007, will step down. In the past few weeks, the BRICS have discussed the selection process of his successor, arguing that the selection should be based on transparency, openness and merit.
The World Bank has received three nominations for the top post. The Obama administration is promoting Jim Young Kim, former director of HIV/AIDS programs at the World Health Organization (WHO). A number of developing nations are supporting Jose Antonio Ocampo, a highly-regarded Colombian economist, and Ngozi Okonjo-Iweala, Nigerian Finance Minister, another respected economist and diplomat.
Behind the façade, Washington has insisted that to keep funding flowing from Congress for the World Bank, the U.S. must retain the presidency. Last summer, European leaders insisted that only a European can understand the Eurozone crisis.
Both arguments ring hollow. The world is no longer Euro-centric. Nor is it any longer US-centric.
Today, the world economy is becoming increasingly multipolar. In such a world, the demands of the BRICS for adequate voice and representation in the international community are only a prudent way to ensure that the world is led by those nations that fuel its growth.
A Century of Waiting
What we are witnessing is the eclipse of the old order of international affairs and the rise of a new one. The transition will not happen overnight. But it is in the interest of both the advanced and emerging economies alike that it is ongoing, directional and proceeds with adequate momentum.
After World War I, the Peace Conference took place in Paris in 1919. At the center were the leaders of the Great Powers: President Woodrow Wilson of the United States, Prime Minister David Lloyd George of Great Britain, and George Clemenceau of France.
What about the BRICS?
After decades of colonial intrusion, the Chinese delegation called an end to imperialist institutions. The Western powers refused Chinese claims, thus paving way to the Japanese invasion of Manchuria in 1931 and to World War II a decade later.
Although a million Indians served in World War I, India had no representative in Paris. In the eyes of the West, it did not exist as a sovereign. Brazil’s role in Versailles was marginal. The Soviet Union was not invited to attend. South Africa participated in World War I, even as the segregationist apartheid policies were consolidated at home.
Altogether, the BRICS comprised about half of the human population on the planet. Yet, they had no role in the creation of the 20th century international order.
Wrong Side of History
While Wilson, George and Clemenceau represented only a tenth of humanity, they made the decisions for the remaining 90 percent.
When President Hu Jintao, Prime Minister Manmohan Singh, and Presidents Dilma Rousseff, Vladimir Putin and Jacob Zuma convene in New Delhi, they will represent almost half of the world’s population and close to a fifth of world GDP.
As the BRICS demand political power that is commensurate with their economic role, they are hardly being irresponsible. In contrast, the BRICS have waited patiently – for a century.
What is pressingly needed today is a real dialogue between the advanced and emerging worlds. Otherwise, the advanced nations will fall on the wrong side of history.
Slightly modified from “The Eclipse of the Old World Order,” China Daily, March 29, 2012
2 Responses to “BRICS Summit Amidst Darkening Clouds in the West”
‘China has to take global economic responsibility.’
Assuming that the advanced nations economies will probably shrink rather than grow in the next five years and the Chinese economy grow at an average rate of about 8-10%, China will be the greatest world economy in less than 10 years. That means within 6 to 10 years China’s GNP (PPP) will be about US$ 15 trillion (compared to about 80 trillion US$ of the world economy).
To be able to create this additional production, additional demand of the same size has to come from someplace. The question is from where it will come? Very probably the advanced nations have no capacity to increase their demand. On the contrary, i expect a decrease of consumption and imports in USA and probably in Europe and Japan too. The source of this additional demand can come only from the emerging economies, which are trying to catch up with the advanced nations. (Wasn’t this the declared aim of the world institutions, to diminish poverty and redistribute worldwide the economic wealth?)
China of course is the leader amongst these emerging economic regions, which include India (with more than 1.4 billion people), Latin America (about 700 million people) and the South-East Asian countries (about 600 million people). The total population of these regions is about 4 billion people, compared to about 1 billion people in the advanced nations. These regions with emerging economies, with young and growing populations (in contrast to the aging and stagnating populations of the developed nations), are about to take over the leading role in the world economy within few years. The question is to what direction those emerging economies are going to take their economic and social development. Most probably they will try to copy the economic and social policy of the advanced nations, where the driving force of the economy is profit and over-consumption. It seems, our planet is having difficulties carrying on with the today’s existing appetite for consumption in the advanced nations and it will be almost impossible for the world to cope with an additional 4 billion “over-consuming” people. It seems inevitable, that any attempts by the emerging economies to achieve the similar levels of consumption as in the advanced nations, will create competition for raw materials and energy sources, and will have a severely detrimental impact on the natural environmental. We actually started to see this scenario in the years before 2008, when the commodity and energy prices skyrocket and we can see the same process starting again. It seems that in today’s technologies, the world level of consumption is close to its upper limits, and any attempt to increase it in one region will have to come on account of another region.
The current economic crisis, started to solve the problem of the uneven distribution of the consumption in the world, since it had hit primarily the most developed regions, and less so the emerging economic regions. The economic stimulus made by advanced nations governments, is actually an attempt to forestall a reduction of consumption in the advanced nations and it had temporarily moderated such a shift of resource use. On the other hand it prevented sudden deep economic crisis, that could have catastrophic political consequences (let us not forget the consequences of 1929 s’ crisis). Yet the economic stimulus can slow down the process of more evenly redistribution of the economic wealth, but can’t stop it.
China’s economic policy, actively supported by US economic policy, in the last thirty years, was to develop its economy on exports. This policy was addictive for both sides, and when prolonged and exaggerated very damaging to their and world economy. An increase of consumption level of a nation is politically and socially easy, its decrease is almost unacceptable. USA is still in the grasp of its addiction to cheap products from China, as contrary to China, that can easily change this unbalance in the world economy. With its current size of economy, China can not make any longer such macro-economic mistakes without causing a major disruption in the world economy. This brings us back to my words at the beginning of this comment, “China has to take global economic responsibility”.
Clear, simple, straight-forward, intelligent, insightful. Well done, Dr. Steinbock! This is the sort of explanation that is easily accessible to anyone with a decent high school education. It can help re-frame the current "debate" in such a manner as to encourage the understanding and the serious consideration of the voting public, the foundation upon which are built the democracies of the "advanced" economies. I just wish more people could read it.