Creation of financial institutions to end the monopoly of World Bank and IMF
The sixth annual summit of the five-member grouping consisting of Brazil, Russia, India, China and South Africa (BRICS) took place in Fortazela, Brazil, during 13th-15th July, 2014. The summit produced a joint Fortazela Declaration; and initiated the creation of a new BRICS Development Bank and a Contingency Reserve Arrangement (CRA), each with an initial capital of $100 billion (Rs. 6 lac crore).
BRICS together represents nearly 300 crore people or about 40 percent of the global population. The combined economic output of China, India and Brazil alone “will surpass the aggregate production of the United States, Germany, the United Kingdom, France, Italy and Canada by 2020”, according to the 2013 Human Development Report of the United Nations Development Program (UNDP).
The new development bank and contingency mechanism are potentially alternatives to the World Bank and the IMF respectively, as sources of financing public investments and for bailing out governments that are in dire financial stress. They are meant as an alternative available not only to the five BRICS members but also to other countries of Asia, Africa and Latin America.
Ever since the disintegration of the Soviet Union and the end of the bipolar division of the world, US imperialism and its NATO allies have enjoyed a virtual monopoly over the international financial system. However, it has become evident by now that the relative economic strength of the US, Canada, Japan and the old European colonial and imperial powers is receding. US imperialism is relying on its superior military might to preserve the hegemony of the US Dollar in international trade, which enables it to enjoy an exorbitant privilege of unlimited purchasing power. It has waged unjust wars on concocted pretexts, as in Iraq, to suppress the attempt of any state to conduct oil trade in some alternative currency. The creation of the BRICS Bank and CRA marks an important step towards ending the monopolistic role of IMF and World Bank in international affairs.
The declaration calls for reforms of the UN and its Security Council, supporting the claims of India, Brazil and South Africa to play a greater role.
China is by far the most powerful member of BRICS. While the new development bank is based on equal contributions from the five members, China is contributing 41% of the initial capital for the Contingency Reserve Arrangement. The development bank will have headquarters in Shanghai. China is using the strengthening of its ties with Brazil and South Africa as stepping stones in its rapid penetration of national economies in Latin America and Africa.
While the Fortazela Declaration is couched in diplomatic language and does not name the United States, Russian President Vladimir Putin was more forthright when he spoke to reporters prior to the summit. He said, “Together we should think about a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies, but would promote a civilised dialogue on all points at issue based on mutual respect.”
The Sixth Summit took place at a time when the leaders of both Russia and Brazil are extremely angry with the US imperialists. Russia is the target of unilateral economic sanctions by the US. There is a concerted barrage of lies being propagated globally to paint Russians as the villains in Ukraine. Brazilian political leaders are angry with the revelation that the US has been spying on them intensely.
Prime Minister Narendra Modi, speaking at the Summit, said, “We must seek urgent reforms of global institutions of governance like the UN Security Council and international financial institutions.” It is also to be noted that he reinforced the long tradition of India-Russia friendship while in Brazil.
The Sixth BRICS Summit shows that the forces pushing towards a unilateral world order under US leadership are coming into inevitable conflict with those who stand to gain from a multilateral world order, with greater space for the newer entrants in the club of imperialist powers. The powers that feel threatened by the aggressive drive of US imperialism towards the conquest of Asia and the whole world are getting together to safeguard their space, their common interests. The Indian ruling class, despite its strategic partnership with the US bourgeoisie, has significant economic and political benefits to gain from BRICS.