The BRICS are now five years old, and the modest agreement on establishing a development bank and pooling of currency reserves moves the grouping beyond a dialogue forum to cooperative mechanisms challenging the 60 year hegemony of the undemocratic Bretton Woods Institutions.
The next step must be a transition in ideas and principles to share global governance and prosperity in an interdependent world.
The BRICS have 20 per cent of world GDP, 23 per cent of the global population, 40 per cent of combined foreign reserves, but only 15 per cent voting rights in the World Bank and IMF.
However, much of the collective clout derives from China’s economic miracle, which is also a quarter larger than the other four combined. China must reassure the others of its commitment to a collective approach, only then will the BRICS move beyond a new version of NAM to reflect the shift into a multi-polar world.
The Development Bank signifies that the BRICS, and others, will not look to the West for developmental guidance and will evolve their own state-driven infrastructure led frameworks that will support sustainable development.
The new framework should look at transformational shifts in growth pathways driven by infrastructure development with a focus on consumption, rather than production, and with human welfare measured not just in terms of economic activity but through broader criteria including ecosystem services and societal considerations.
Under the current system, redistribution has also been kept out of the UN, with its stress on political and human rights to the exclusion of economic and social rights, which were relegated to the non-democratic Bretton Woods Institutions with governance based on ‘one dollar one vote’ rather than ‘one country one vote’.
Reforming World Bank
While institutions matter, the new bank is not a ‘litmus test’ of the BRICS coming of age but a major step in reforming the World Bank, including towards infrastructure projects. Similarly, agreements on conducting trade in local currencies (expected to reach $500bn in 2015), exchange-rate stability and a rating agency will dilute and democratise the role of the IMF.
So far the BRICS countries have not taken a view of the way global rules in the World Trade Organization are now sought to be reshaped not through multilateral ‘give and take’ but through regional trading rules amongst the developed countries being imposed on the multilateral institution.
In the area of security, BRICS is rightly focusing on preventive diplomacy and mediation. A broader definition of ‘ecological’ security will also shift the focus on promoting peace rather than managing conflict.
The success of this rebalancing will depend on pragmatism in developing and setting the global agenda.
The BRICS should consider Chinese leadership of the new Development Bank, even to internationalise the Renminbi. The think-tank of the BRICS could be located in India with its strong tradition of conservation, for charting the course of the United Nations towards a more equitable and sustainable future.
South Africa could be tasked with developing rules for infrastructure development and mining, avoiding a repeat of the scramble that took place in Africa, and also monitor their implementation.
Brazil could look at food security, the valuation of ecosystem services and intellectual property rights based on their use. Russia is well placed to develop global rules on long term energy access and a fair pricing mechanism to replace the current system of interference in internal affairs of energy suppliers.
No doubt, the BRICS will continue to rely on a global rule-based system but with new approaches responding to new challenges, through resolutions and treaties, around the UN Economic and Social Council rather than the undemocratic Security Council and Bretton Woods Institutions.
Despite common ground on areas of importance, pitfalls remain in reforming a global system that served the natural resource and security needs of 20 per cent of the population to one that will share prosperity with all of humanity.
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