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Geopolitics trumps economics

by Ramesh Thakur

The BRICS (Brazil, Russia, China, India and South Africa) have just concluded their sixth annual meeting in Brazil. The major deliverable was economic in form and content, but its major significance is primarily geopolitical.

Last October, President Dilma Rousseff was to be the first Brazilian leader to attend a White House state dinner in two decades. Instead, angered by revelations that her phone calls and email had been intercepted by the National Security Agency (NSA), she became the first leader to cancel a state dinner hosted by a U.S. president, lambasting U.S. surveillance as a violation of international law and a “totally unacceptable” infringement of Brazil’s sovereignty.

Russia’s President Vladimir Putin is routinely demonized these days by American political leaders and media commentators. India’s Prime Minister Narendra Modi was on the U.S. visa denial list for nine years (2005-14). It takes skill to position oneself offside simultaneously with three of the most important leaders from the emerging powers.

Russia is being subjected to sanctions for its annexation of Crimea — which was Russian for several centuries and was voluntarily “gifted” to the Ukraine by Soviet leader Nikita Khrushchev — despite the concrete threats to its Russian-speaking majority population and to Russia’s core national security interests, despite a referendum whose margins of results may be questioned but not the overall outcome, and despite not one fatality resulting from the operation.

In the Ukrainian crisis, provocations from Europe, the West and Kiev, and humanitarian atrocities by the latter, are generally ignored. And the countries censuring Russia and imposing sanctions on it are those responsible for the Iraq war in 2003 — whose legal and security justification was far more tenuous, whose theater was geographically distant and whose humanitarian and geopolitical consequences were far more horrific and destabilizing.

Last December in the U.S., a junior Indian diplomat was arrested and strip-searched over labor laws and wage disputes in a deliberate subordination of international conventions to domestic U.S. law, when U.S. diplomats posted abroad have been muscularly shielded from domestic laws even when they have killed host nationals. In the case of China its citizens have been charged with cyber-espionage after the public revelations of the industrial-scale surveillance activities of the NSA around the world and within the U.S. Espionage by the U.S. has even resulted in the expulsion of two Americans from Germany, as solid a U.S. ally as any in the world. Beijing is told to solve its maritime disputes in accordance with the U.N. Convention on the Law of the Sea — to which Washington is not party.

The hubris and arrogance of the U.S.-led West is so breathtaking as to be scarcely believable. It’s as though they have simply lost the capacity, and/or are indifferent, to see how others see them. They just don’t care.

That same insensitivity toward others’ voices, values and interests lies behind the creation, consolidation and evolution of BRICS. The grouping was a shorthand proxy to describe the shift in market power and geopolitical clout from the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom and U.S.) toward the large and populous emerging market economies.

BRICS is important because it clubs together the big emerging markets whose economic growth will outstrip and anchor the rest of the world, and because of the diversity and spread of continents, political systems, values and economic models. They make up two-fifths of world population, one-fifth of world GDP, one-seventh of world trade and two-thirds of world growth.

By 2025 the Group of Eight — the world’s eight biggest economies — is likely to be, in order, the United States, China, India, Japan, Germany, U.K., France and Russia.

At the 2013 Durban summit, South Africa’s Finance Minister Pravin Gordhan remarked that the “roots of the World Bank and the IMF still lie” in the post-1945 equations. Before the first Russia summit in 2009, Brazil’s President Lula da Silva wrote of “broken paradigms and failing multilateral institutions.” The system that privileges Western powers and their biases is trapped in the old paradigm and out of sync with the new realities. The deficiencies eroded the legitimacy and credibility of the international financial institutions and fostered mistrust between the North and South.

At the 2012 Delhi summit, BRICS advanced from simply an expression of frustrated entitlement to sketching the outlines of an alternative configuration of global governance. They underlined the urgency of enhancing “the voice and representation of emerging market and developing countries” in the Bretton Woods institutions in order to “better reflect economic weights.” The criticisms of the voting formula, funding priorities and executive directorship of the International Monetary Fund and World Bank reflected both frustrations at how they are run and growing self-confidence in their own roles as responsible stakeholder-managers of the system of global economic governance.

The five thus warned they meant to use their demographic and economic clout to challenge and change the way the world is governed through formal multilateral machinery and informal groupings. Yet BRICS is also of uncertain unity, coherence and staying power because of a lack of unifying values, principles, goals and interests among its members. Critics dismissed the BRICS for lacking the necessary cement to bind them together.

A critical test of whether BRICS could make the transition from a critic of the West-led system of global economic governance to creating and managing an alternative system of, by and for developing countries was whether the idea of a BRICS development bank, floated for study at the Delhi summit, was successfully implemented.

At Fortaleza on July 15-16, four issues were up for discussion about the proposed bank: name, location, presidency and shareholding. All four were settled by consensus. It will be called the BRICS New Development Bank and headquartered in Shanghai. The inaugural president will come from India.

To avoid the problems of the IMF and World Bank, shareholding will be equal. The bank is to be capitalized initially at $50 billion (and subsequently at double that amount), with each country contributing $10 billion over the next seven to eight years. It will prioritize loans for developing countries to finance infrastructure projects, industrialization and productive, inclusive and environmentally sustainable development.

In addition there will be an emergency reserve pool, called the Contingency Reserve Arrangement, also with a $100 billion capital. China will provide $41 billion, Brazil, India and Russia $18 billion each, and South Africa the remaining $5 billion. Its purpose will be to help developing countries avoid short-term liquidity pressure, strengthen the global financial safety net, complement existing international arrangements, and foster more cooperation among the five BRICS members. Developing countries will be able to draw on the reserve if they face balance of payments crises or if their currency is under pressure.

Global governance just got a lot more interesting.

Ramesh Thakur is a professor at the Crawford School of Public Policy, Australian National University

  • Ostap Bender

    Hypocrisy is the American way.

    • https://twitter.com/chanceawilson Chance Wilson

      And ignorance seems to be your way.

    • Starviking

      Really?

      Taking a look at India we have: Kashmir occupied, as it was a state ruled by a Hindu Prince. That was what mattered, not the wishes of its Muslim inhabitants.

      Hyderabad occupied, as it was a state largely inhabited by Hindus. That was what mattered, not the wishes of its Muslim ruler.

  • VerityHeld

    “The hubris and arrogance of the U.S.-led West is so breathtaking as to be scarcely believable. It’s as though they have simply lost the capacity, and/or are indifferent, to see how others see them. They just don’t care.

    That same insensitivity toward others’ voices, values and interests lies behind the creation, consolidation and evolution of BRICS.”

    I agree with the comment about hubris and insensitivity, especially that of the US and increasingly, of poor Canada under the heel of the heel Stephen Harper. Of course, there is just as much hubris and insensitivity in presuming BRICS has the moral high ground. Putin cares as much for how others see him as George Dubya Bush, and India is the home of a repressive caste system that is seemingly headed BACK to suttee and thuggism, along with rape as almost a male rite of passage. Instead of praising BRICS, perhaps consider a plague on both houses.

    • zer0_0zor0

      Those are some worthy points, generally speaking, but in relation to the article, I’m not sure that the author was trying to claim the moral high ground for the BRICS as much as indicate that the evolution of that organization was starting to level the playing field, so to speak, in some ways.

      The author does portray the BRICS as consolidating in reaction to the hubristic and hegemonic presumptions exhibited by the West and the OECD, implicitly, who act like they have some moral justification to act in that manner.

  • phu

    I don’t understand why authors like this feel the need to lean on painfully one-sided accounts of events and issues that plainly ignore their surrounding circumstances. Putin being demonized makes him the underdog? The same for Modi? Sanctions against Russia for annexing Crimea are deplorable simply because they are sanctions? The fact that the people sanctioning Russia were responsible for the Iraq war is somehow relevant?

    There are so many VALID reasons for nations to want options outside of the IMF and World Bank that this kind of willful ignorance not only fails to make the point, it actually harms an argument that should probably be taken seriously. It also ignores the very grave potential problems BRICS faces, notably including instability in both China’s and Russia’s international politics.

    Calling BRICS a good idea that might have some potential does not require demonizing the entire non-BRICS world. Doing so is, quite simply, counterproductive.