BRICS bank

Macrobusiness blog in Australia has carried the full declaration released by the BRICS summit. It is interesting and even surprising to note that the BRICS leaders had reached an agreement on the BRICS bank, its share capital, location and management structure, etc. Predictable reaction from a Western news outlet.

I am not too enamoured of BRICS as an alternative to the discredited West because BRICS suffers from some of the same maladies that the West suffers from and some others too. Governance is captured by special interests and governments provide lip service to the common man and BRICS nations are not exactly committed to financial stability as opposed to favouring asset bubbles. So, BRICS as a group does not provide an alternative governance model. Uninspiring and morally and ethically inept and unsound leadership is a global phenomenon

Nevertheless, the new BRICS bank and the fund of contingent reserves are interesting and welcome developments from a geo-political perspective. Western dominance of multilateral institutions has to be resisted and pushed back. That is why BRICS’ warning on IMF governance reforms has not come a day too soon.

[Postscript: MINT has a detailed news-article on the BRICS bank. There is a concern that India might have ceded ground to China in allowing the location of the bank to be in Shanghai. I am not sure that it is a setback. Given China’s clout (even if its USD8.0trn GDP is overstated by about USD2.0trn), it is only natural that China got the HQ rights for the new institution. But, my first reaction is that it seems to be a good deal, for all the five countries. Put differently, I am happy to count the gains of the progress they have made on this matter than nit-pick]

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2 thoughts on “BRICS bank

  1. Dear Ananth,

    Thank you for writing this blog post. Personally I believe that the creation of the New Development Bank (NDB), to call it by its official name, is a very welcome development. None of the news sources I read carried the full details of the structuring of the bank, which was contained in the declaration, namely:

    “The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters. We direct our Finance Ministers to work out the modalities for its operationalization.”

    This is a nice attempt at “power-sharing,” with the location of the HQ, the Chairmanship of the Board of Governors and of the Board of Directors, and the Presidency, being the four poles, and split amongst the four big powers. South Africa is sought to be placated with a regional center, as it is clearly far behind the other four countries.

    It would be good if your readers could find out your views on the relative importance of these four positions. For instance, is the Presidency more important to the functioning of the bank compared to chairing the BoG or BoD? I do not know, but I expect you would know.

    Your comment that “Uninspiring and morally and ethically inept and unsound leadership is a global phenomenon” is of course spot on target. The real issue is the extent to which the rapacious plutocrats in a country hold their greed in check, to prevent an uprising by the masses, either literally or figuratively. On this point, I would have to say that India does not come off too badly, in my view. One can argue that our crony capitalists get a great many favours, but they also employ lakhs of people and for the most part, pay them decent wages. In contrast, the capture of the US government by the financial sector creates a handful of multi-billionaires and creates no ripple effect whatsoever by way of secondary jobs generated. Perhaps, when you have the time, you can write an essay going into different forms of govermental capture by vested interests, and the different effects of the same.

    I read also the link in the Bloomberg Business Week. For the most part the commentators are more balanced than the author herself (but then that is a widespread phenomenon these days). We Indians need to remind ourselves that the first impression is the best impression, and that our off-putting physical appearance leads visitors to undervalue our society. As Mahatma Gandhi pointed out, and our Prime Minister reiterated, merely because we are poor, we need not also be dirty!

    Thanks again for your blog and warm regards.

    Like

    1. thank you for your comments, Dr. Sagar. You have given me some interesting tasks. Let me see if I can do justice to them.

      Like

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