Brazil, Russia, India, China and South Africa together represent 40% of the world’s population and 25% of the global gross domestic product (GDP). Total trade among the countries is $6.14 trillion, or nearly 17 percent of the world’s total.
These are the three major reasons they formed BRICS, an association to promote cooperation among the five emerging economies. Another major reason has been to oppose U.S. hegemony and to find a way to challenge the global financial dominance of America and its ruling lenders: the International Monetary Fund and the World Bank.
BRICS took a major step in forcing its challenge last week. It formed two multi-billion-dollar funding structures to promote cooperative economic development independent of the West. The first is the New Development Bank, started with $50 billion and expected to quickly expand to $100 billion. The second is a crisis lending fund of $100 billion, called the Contingent Reserve Arrangement.
Western media hasn’t been excited about covering this event. Even The New York Times buried a story deep in its World section last week.
But Nobel-prize-winning economist Joseph Stiglitz vocally understood the importance of the BRICS move. He said last Thursday on the progressive TV program Democracy Now:
It’s very important in many ways. This is adding to the flow of money that will go to finance infrastructure, adaptation to climate change — all the needs that are so evident in the poorest countries. It [also] reflects a fundamental change in global economic and political power. The BRICS countries today are richer than the advanced countries were when the World Bank and the IMF were founded. We’re in a different world — but the old institutions haven’t kept up…
…there have been a lot of changes in the global economy. And a new institution reflects the broader set of mandates, the new concerns, the new sets of instruments that can be used, the new financial instruments, and the broader governance. Realizing the deficiencies in the old system of governance, hopefully, this new institution will spur the existing institutions to reform. And, you know, it’s not just competition. It’s really trying to get more resources to the developing countries in ways that are consistent with their interests and needs.
Effort to Replace the U.S. Dollar
The new bank and fund are also sharp picks BRICS will use for chipping away at the U.S. dollar’s dominance as the world’s reserve currency. Since the 2008 global economic meltdown, some economists have called for replacing the dollar with the Chinese yuan. And Chinese policymakers have been quietly seeking to slowly make that a reality.
China is a major holder of U.S. debt in the form of bonds, and its central bank has recommended trading in oil with yuan rather than dollars while it looks for more ways to make the yuan a more acceptable currency worldwide.
It took a major step recently through a historic agreement with Russia to purchase Russian natural gas—a growing effort by China to move away from burning coal, which has led to major pollution problems. Russia and China agreed to fulfill the energy contract with yuan and rubles, not U.S. dollars.
But this was more than a single major business deal. It was a symbol to the world, and particularly to the BRICS fellow countries, that BRICS unity could lead to major trade benefits.
China as Global Leader
Also, China President Xi Jinping appears to really be pushing to grow China’s image as an economic and political leader. And Simon Baptist, chief economist and Asian regional director for The Economist magazine’s intelligence unit, commented on this last Thursday:
China is in the midst of a serious economic and political transition and both are having global impact. Over the past decade or so the growth rate in China, with strong government control, has been amongst the fastest in the world. This has led to a marked shift in the attitude of many governments across Asia, Africa and Latin America, which have grabbed the opportunity to have a role model justifying a government-led approach.
Xi’s effort has led to BRICS agreeing to headquarter the New Development Bank in Shanghai. And he hasn’t limited the idea just with BRICS for a development bank to oppose Western financial control. Xi proposed a $50 billion Asian Infrastructure Investment Bank when he was visiting Southeast Asia last October.
He also made a major speech last week where he addressed not only BRICS, but the rest of South America, encouraging a growing economic and political alliance. In that speech, he spoke generally of hegemony, not mentioning any specific country; but BRICS and other South American countries understood he was referring to the United States. Most of those countries are primed to find ways to oppose the U.S., its dollar, and the IMF and World Bank for their efforts at financial control. Add to that growing information of U.S. efforts through the National Security Agency’s spying on those countries.
The IMF also has become a villain to struggling countries because of its demand for austerity to lower debt, but now also seen as a plot for privatizing public utilities and lands—a primary effort toward oligarchic rule of a nation.
The China-BRICS-and-Beyond train has been slow-moving. But its current activity is showing growing power in its economic engine. And, while its countries also have their own internal struggles, they’re all well aware that the old warhorse U.S. and its efforts at empire have led to a nation of discontent, married to its policy of endless war, and American citizens being saddled with a nearly trillion-dollar credit card debt, over a trillion-dollar student loan debt, a national debt of $12.5 trillion (held by the public), and national infrastructure needs of $2.3 trillion. And a banking industry creeping back into financial practices that led to the 2008 global economic tragedy.
How can you turn this around? As always, Peculiar Progressive recommends you get organized, educated and active politically, and push your President and Congress toward national bank and media-conglomerate reform, and global cooperation rather than hegemony.