The new BRICS development bank: new challenge to the IMF/Washington Consensus

The BRICS countries (Brazil, Russia, India, China and South Africa) last week announced they were setting up a new development bank that would provide an alternative source to the IMF for development loans.

Joe Stiglitz discusses it in this Democracy Now! report, Nobel Economist Joseph Stiglitz Hails New BRICS Bank Challenging U.S.-Dominated World Bank & IMF 07/17/2014. Stiglitz says this "reflects a fundamental change in global economic and political power."

The YouTube summary of this reports says:

A group of five countries have launched their own development bank to challenge the U.S.-dominated World Bank and International Monetary Fund. Leaders from the so-called BRICS countries -- Brazil, Russia, India, China and South Africa -- unveiled the New Development Bank at a summit in the Brazilian city of Fortaleza. The bank will be headquartered in Shanghai. Together, BRICS countries account for 25 percent of global GDP and 40 percent of the world's population. To discuss this development, we are joined by Nobel Prize-winning economist Joseph Stiglitz, a professor at Columbia University and the World Bank's former chief economist. "It's very important in many ways," Stiglitz says of the New Development Bank's founding. "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."

Here are a couple of reports from The Real News.

Is the New BRICS Bank a Challenge to US Global Financial Power? 07/18/2014 features a debate between a heterodox economist and a more-or-less dogmatic left thinker:

Leo Panitch in that interview argues that the new BRICS efforts are just another variation on neoliberal economics. He cites the example of the Bank of the South, which in his description was made ineffective by Brazil's insistence on it being "a very conventional development bank."

Michael Hudson of the University of Missouri-Kansas City considers it far more significant. I didn't find Panitch's criticism convincing just because it isn't so clear to me. Hudson stresses the significance of the aspect of independence from US financial hegemony in the new BRICS effort. Panitch seems to be saying that because the BRICS isn't an anti-capitalist bloc of nations, it's not that significant. Hudson's stress on the independence aspect seems to me to be the better measure of the significance of this development.

Panitch even says demands at around 14:40 that Hudson not "try to turn Putin and his cronies into the vanguard of a new socialist society," which is not something Hudson or anyone else I know of is arguing about the BRICS and the new development bank. (See Stiglitz' discussion above.) I'm fond of utopian criticism when it's done right. But Panitch really seems to be arguing that if this is not some explicit and pure vision of whatever brand of socialism he favors, it has no real importance.

Actually, a break from the neoliberal international system on things like capital controls can be vital in enabling a country to pursue Keynesian, pro-labor policies, as we see in Argentina. And that is extremely important. That would presumably be especially so for anyone who wants to see a society that fits into the classical socialist vision, as Panitch seems to. But the truth is that some leftwing intellectuals have carved out niches for themselves as more-or-less permanent cranks to the point they can be entertaining but often falls into a lazy and sterile this-isn't-perfect-so-why-should-I-care type of analysis.

At just after 12:30, Hudson brings the conflict between Argentina and the Nixon-appointed zombie judge Thomas Griega into the conversation.

Here's another Real News video emphasizing the neoliberal practices that can be found among the BRICS, BRICS: Progressive Rhetoric, Neoliberal Practice 07/19/2014:

Mario Osava reports for Inter Press Service on the disappointment of some activists over the new bank in International Reform Activists Dissatisfied by BRICS Bank 07/22/2014:

The creation of BRICS' (Brazil, Russia, India, China and South Africa) own financial institutions was "a disappointment" for activists from the five countries, meeting in this northeastern Brazilian city after the group’s leaders concluded their sixth annual summit here.

The New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), launched Tuesday Jul. 15 at the summit in the northeastern Brazilian city of Fortaleza, represent progress "from United States unilateralism to multilateralism," said Graciela Rodriguez, of the Brazilian Network for the Integration of Peoples (REBRIP).

I'm more inclined initially to see this as a hopeful, progressive development in the world.

Time will tell. Time and the actual performance of the NDB and CRA.

Tags: brics, new development bank