Can the BRICS Lead a Global Breakthrough on Sustainability? *********************************************** AUTHOR(S): Mukul Sanwal DATE: 29 - Apr 2013 TAGS: BRICS , Development , China , India , World Bank THEME(S): Governance , Sustainability The BRICS Development Bank is a major opportunity for the non-Western world to move away from the Bretton Woods and Washington Consensus, writes Fung Global Institute Guest Contributor Mukul Sanwal. The Bank will be a benchmark for the five member states and a chance for them to establish their own development models. Brazil, Russia, India, China and South Africa, the countries that make up the BRICS grouping, are a response to globalisation; each member state has gained influence in recent years from the strength of their economies and integration into the global marketplace. Coined as an investment destination of a loose group of populous emerging economies, the BRICS have matured into a collation that can challenge the Western-dominated global order. In just five years, the group has moved beyond a dialogue forum to cooperative mechanisms, as the latest regional bloc to chip away at the 60 year hegemony of the undemocratic Bretton Woods Institutions. Together the BRICS make up 20 per cent of the world’s GDP, 23 per cent of its population, 40 per cent of combined foreign reserves, but only 15 per cent of voting rights at the World Bank and International Monetary Fund (IMF). The major achievement of the Fifth BRICS Summit, in Durban, South Africa, in March this year was its agreement to create a new development bank run by the five states. While institutions matter, the modest agreement on a new bank is not a ‘litmus test’ of the BRICS’ coming of age, but a major step in reforming the World Bank – particularly in pressuring the organisation to increase its meagre US$30 billion lending for infrastructure projects. Similarly, currency-swap agreements (expected to reach US$500 billion 2015), exchange-rate stability and a rating agency will dilute and democratise the role of the IMF. The new BRICS bank is a milestone for the organisation because it signifies that developing countries will no longer look only to the West for developmental guidance, and will evolve their own state-driven infrastructure led frameworks that will support sustainable development. The multilateral system has long been divided between the United Nations, which often lacks the political teeth to impose its decisions, and the Western-dominated Bretton Woods Institutions, with governance based on ‘one dollar one vote’ rather than ‘one country one vote’. Reshaping a global system that served the natural resource and security needs of 20 per cent of the population to one that will share prosperity and peace with all of humanity in an interdependent world, will require the BRICS to overcome their disparate interests by evolving a common definition of the collective future of developing countries. The deliberations on the post-2015 agenda for the United Nations provide the BRICS with the opportunity to shape the global agenda on how standards of living can be raised world-wide within ecological limits. By 2030 the BRICS’ demand for food and energy is expected to rise 50 per cent, and water stress could potentially fuel inter-state conflict. Since dealing with global ecological limits remains an unresolved issue, the disparity and disparate interests amongst the BRICS can be overcome by evolving a common definition of the collective future around global sustainability. The BRICS will have to respond to natural resource scarcity as the most dominant global trend of the twenty-first century, making the shift more than just a continuation of the current system, requiring new global rules based both on markets and social considerations. The focus will have to be on consumption, rather than production, and with human welfare measured not just in terms of economic activity but through broader criteria, including ecosystem services. Creating markets for economic growth and then creating new markets to clean up have led to the current global ecological crisis; climate change is an excellent example of market failure. After the financial crisis of 2008, there has been a significant amount of discourse and questioning of free market ideology, of the “Washington Consensus,” and the unresolved issue of whether it will be replaced with a “BRICS Consensus” or a “Beijing Consensus.” Much of the collective clout of the grouping derives from China’s economic miracle, whose economy is a quarter larger than the other four combined, but does not have the monopoly of power enjoyed by the United States at the end of World War II when it established the new international order. China must reassure the others of its commitment to a collective approach, and only then will the BRICS be able to move beyond a new version of the Non-Aligned Movement to reflect the shift to a multi-polar world. In this re-balancing, the BRICS may have to continue to rely on a global rules-based system but with new approaches to respond to new challenges, through resolutions and treaties around the UN Economic and Social Council while diluting the role of the Bretton Woods institutions. The deliberations at the March summit show that the BRICS can move beyond a trust deficit. Whereas in the area of security, a permanent seat in the Security Council has been a divisive issue amongst the BRICS as countries like India, Brazil and South Africa struggle to find endorsements. But even so, China and Russia are taking great measures to support these countries so that they play a greater role in international affairs. Therefore, the BRICS are rightfully focusing on preventive diplomacy and mediation - promoting peace rather than managing conflict. Just as the predominant roles within the multilateral institutions were divided amongst the G7, India’s comparative advantage lies in the think-tank of the BRICS being located in Delhi. With its tradition stemming from conservation, it would enable the country to gain influence by impacting on the global agenda of reshaping the United Nations towards a more equitable and sustainable future for all. Similarly, Chinese leadership of the new Development Bank is inevitable as its economy will likely overtake the US in the next five years. To that end, the BRICS should focus on the strategic guidance that will be provided to the body. Indeed, China has already taken steps to put sustainable development at the centre of its growth strategies for the years ahead, and other BRICS have made similar overtures. It would be a natural next step for the BRICS to move towards a more definitive collective approach to sustainable growth that could be shared as a model at the global level.
Posted on: Fri, 05 Jul 2013 21:11:19 +0000
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