"We are a sovereign nation and we are not being treated as such." Image credit: Shield the People
The IMF and the World Bank may finally have a rival. It’s called the New Development Bank, and it is being set up by Brazil, Russia, India, China, and South Africa together (the BRICS, as they are called).
Nobel laureate Joseph Stiglitz, a former chief economist for the World Bank and a fervent critic of the IMF, contends that the bank represents a major realignment.
“It reflects a fundamental change in global economic and political power,” he told Democracy Now. “We’re in a different world.”
The initial capitalization will be $50 billion, and each country will have one vote.
“The fact that BRICS nations have pulled off a one-country-one-vote governance structure demonstrates that the idea of BRICS is here to stay and proves wrong all the skeptics in the Western press who had suggested these countries will never reach an agreement on critical issues like voting power, location of the bank and other matters relating to sharing of governance,” writes FirstPost, an Indian website. “Till a few years ago, no one gave the bank a ghost of a chance. Today, it is a reality.”
Sameer Dossani, advocacy coordinator for ActionAid International, is “cautiously optimistic” about the new bank and what it means for poorer countries.
“Alternatives to the Bretton Woods Institutions [the IMF and the World Bank] are a good idea,” Dossani tells The Progressive. “Those institutions were founded seventy years and have been largely used as instruments of U.S. foreign policy ever since. The Washington consensus policies of liberalization, privatization and budget cuts have proved disastrous time and again for citizens around the world.”
The bank has a few predecessors.
“In the late 1960s, Andean nations created the Corporación Andina de Fomento (CAF), also known as the ‘Development Bank of Latin America,’ as a way of bypassing the stringent rules imposed by the World Bank on infrastructure loans,” reports the Washington Post. “In 2009, seven Latin American countries signed an agreement to establish the ‘Bank of the South’ or BancoSur to fund regional development and social protection, and in which each member nation would have one vote.”
A few Latin American nations have even established a common currency of sorts: the SUCRE.
“The SUCRE is essentially a series of clearing accounts between Cuba, Bolivia, Venezuela, and Ecuador that allow the countries to trade freely without transaction costs,” writes Stephanie Pearce in NACLA Report on the Americas. “Accounts are balanced every six months with one hard currency transfer. The value of trade conducted via the SUCRE in its first year of operations, 2010, was just over $8 million. It grew exponentially, to almost 100 times that the following year.”
Dossani asserts that regardless of the problematic nature of the BRICS leadership—especially the Chinese and Russian autocracies, underscored recently by Russia's invasion of Ukraine, and the deepening conflict there after the downing of a passanger airplane, apparently by Russian-supported separatists—the new bank will open up space for alternative policies.
“The BRICS countries all use state industrial policies to promote their national development strategy,” says Dossani. “We can argue about whether those particular strategies are good or bad, but using the state in this way is not an option for most countries who have had their budget and revenue streams gutted by IMF austerity and privatization policies.”