It is easy to understand why Prime Minister Manmohan Singh, who is in Durban for the BRICS summit, acquires a spring in his step whenever he travels overseas. It gives him a break from the pillorying he receives at home from a hypercritical media that points out repeatedly to the mismanagement of the Indian economy under his watch. And since he is a rare economist-Prime Minister – you don’t see too many of those on the world stage –his public articulations on economic matters are treated as the sage pronouncements of a Delphic oracle. Even if much of his punditry and his policy recommendations for the global economy centre around reformist ideas that he has himself failed to implement back home.
Last year, at the BRICS summit in New Delhi, for instance, Manmohan Singh advanced the case for a BRICS Development Bank, which was enthusiastically embraced as an institution that would advance the cause of development in the middle-income countries that are banded together under the BRICS label. But even before the fine details of what the Bank would hope to achieve had been finalized, the project began to be overtaken by hyperbole.
Some policymakers from the BRICS economies began pushing a political agenda and visualised the BRICS Development Bank as manifesting a “money-power arrangement” that would soon rival the multilateral development banks like the World Bank and the IMF.
The fact that the World Bank and the IMF had scaled back their lending arrangements with middle-income countries in order to focus sharper on poorer countries channeled that sentiment – and saw the proposed BRICS Bank as an alternative financing mechanism.
But it didn’t help that even among the BRICS economies – Brazil, Russia, India, China and South Africa – there was no convergence of views on precisely what the Bank would seek to accomplish. As the then World Bank president Robert Zoellick observed at that time, India wanted the money, China wanted to internationalise its currency (the renminbi), and Brazil just wanted to be associated with the concept.
The BRICS nations have given voice in the past to the need for a comprehensive overhaul of the management of the World Bank and the IMF in order to accommodate the growing clout of emerging economies. That became a polemical point to make when the heads of both the World Bank and the IMF were replaced in the past two years, particularly since the US and Europe exercised their hitherto-undisputed privilege of drawing the appointees from among themselves.
But even at such a moment, the BRICS leaders could not summon up the unity of purpose that would have enabled them to put a credible, common candidate to these institutions to challenge the traditional influence of the US and Europe. On the other hand, the leaders of the BRICS countries were far more preoccupied with striking quiet deals for themselves that would have advanced their own national interests.
It is this that goes to the core of why the BRICS Development Bank, which will cross another milestone in its conceptualisation in Durban today, will likely remain just a pie in the sky.
For all the catchiness of the BRICS acronym, there is little that truly binds the countries – either politically or economically. Nor does it help that beyond the photo-ops of the leaders of five leaders in poses that reflect enormous solidarity against “the West”, there is a lot of back-stabbing that goes on behind-the-scenes.
Analysts who attend the BRICS deliberations point out: “By day they talk grandly of multilateral action to tip the playing field in favour of poorer nations, while by night they scheme shamelessly against each other, often in conjunction with their supposed economic oppressors in the West.” There is, he adds, virtually nothing that unites them other than resentment and suspicion of Western monopoly – not all of which is justified.
Which is why the initial expectations about the proposed BRICS Bank are increasingly being tempered by sober reflection on the limitations within the organization. Speaking in Durban on Monday, an analyst at South Africa’s Standard Bank acknowledged that it would be “some time” before it became feasible for the bank to start financing infrastructure projects even within the BRICS grouping.
In fact, discussions over the past year among the member countries have failed to overcome even minor hurdles – from where the bank will be located to the amount of capital that members will contribute and what projects will qualify for lending. So much so that even China, which was looking to use the platform to leverage its economic clout for political gain, has over the past year turned relatively cool to the idea.
As other analysts have pointed out, the real test of whether the bank will enjoy credibility even within the member-countries will be tested severely in times of crises, since much of it depends on the political ethic. “For one country to bail out another in a moment of crisis requires a deep political bond, and I just don’t know whether five countries on three different continents with no real historical bond have that level of commitment.”
Still, having committed themselves to the project, the five countries will probably make glacial progress towards establishing such a financing arrangement. But unless dramatic changes sweep across the global economy, causing a tectonic shift in power arrangements, it will be little more than a castle in the air.