A
Challenge From The Brics Part 1 of 3
08/01/2014
Challenge
From the BRICS
New York Times, By THE EDITORIAL BOARD JULY 23, 2014
On July 15, the leaders of Brazil, Russia, India, China and South Africa — the BRICS group of nations — announced the creation of the New Development Bank aimed at challenging the American-led global economic order.
The United States and Europe should take note that these nations are determined not to be constrained by Western institutions that fail to accommodate their ambitions.
The frustrations of this five-nation bloc are understandable, if somewhat divergent. Brazil and India blame the West’s 2008 financial crisis for sapping economic growth.
~~
New York Times, By THE EDITORIAL BOARD JULY 23, 2014
On July 15, the leaders of Brazil, Russia, India, China and South Africa — the BRICS group of nations — announced the creation of the New Development Bank aimed at challenging the American-led global economic order.
The United States and Europe should take note that these nations are determined not to be constrained by Western institutions that fail to accommodate their ambitions.
The frustrations of this five-nation bloc are understandable, if somewhat divergent. Brazil and India blame the West’s 2008 financial crisis for sapping economic growth.
~~
South Africa and India need
capital for infrastructure development, preferably without conditions imposed
by the International Monetary Fund or World Bank. China, whose economy is
expected to surpass that of the United States as the world’s biggest sometime
soon, doesn’t see why its currency shouldn’t replace the American dollar in a
good portion of global transactions.
Russia, ousted from the Group of 8 and facing Western economic sanctions following its annexation of Crimea and support for rebels in Ukraine, is working to build closer relationships with China and the rest of its fellow BRICS.
The BRICS contain 40 percent of the world’s population and account for 20 percent of global economic output, yet only Europeans and Americans have led the I.M.F. or the World Bank.
The United States Congress has contributed to frustration by refusing to pass legislation to shift voting power more fairly among I.M.F. member states — even though this would cost the United States nothing.
China represents 70 percent of the collective gross national product of the BRICS. A China Development Bank already exists, and China is creating its own Asian Development Bank.
The New Development Bank will be based in Shanghai. India will assume the presidency of the bank for the first six years, followed by rotating terms for Brazil and Russia, but how this will counterbalance China’s economic clout is far from clear.
The bank will begin with an initial capital of $50 billion, rising to $100 billion, with a separate $100 billion Contingent Reserve Arrangement. The BRICS plan to bring in other developing countries in Africa and Asia, and they are talking about creating a regional-security alternative to NATO.
The BRICS nations have quite different political systems. Russia and China, for instance, are authoritarian regimes; India and Brazil are democracies.
Russia, ousted from the Group of 8 and facing Western economic sanctions following its annexation of Crimea and support for rebels in Ukraine, is working to build closer relationships with China and the rest of its fellow BRICS.
The BRICS contain 40 percent of the world’s population and account for 20 percent of global economic output, yet only Europeans and Americans have led the I.M.F. or the World Bank.
The United States Congress has contributed to frustration by refusing to pass legislation to shift voting power more fairly among I.M.F. member states — even though this would cost the United States nothing.
China represents 70 percent of the collective gross national product of the BRICS. A China Development Bank already exists, and China is creating its own Asian Development Bank.
The New Development Bank will be based in Shanghai. India will assume the presidency of the bank for the first six years, followed by rotating terms for Brazil and Russia, but how this will counterbalance China’s economic clout is far from clear.
The bank will begin with an initial capital of $50 billion, rising to $100 billion, with a separate $100 billion Contingent Reserve Arrangement. The BRICS plan to bring in other developing countries in Africa and Asia, and they are talking about creating a regional-security alternative to NATO.
The BRICS nations have quite different political systems. Russia and China, for instance, are authoritarian regimes; India and Brazil are democracies.
|
Some of them may be more willing than others to observe
international norms on, say, human rights, and some may be more inclined to
condition investments on environmental protection.
It will be interesting to see how these differences play out in the bank’s governance and operations. http://www.nytimes.com/2014/07/24/opinion/a-challenge-from-the-brics.html?_r=1 |
Post By BigDog-OH Brought From Intel4u Part 2 of
3
For The BRICS Bank, A Tough Road Ahead By RUSSELL GREEN
The announcement of a new BRICS Bank displays the desire of emerging economies to move away from Washington D.C.-style lending institutions.
But between India’s bureaucratic efficiency and China’s indifference to humanitarian, environmental and regional concerns, they resemble John F. Kennedy’s tart characterisation of the very place they hope to leave behind.
Much work lies ahead for the creators of these new multilateral financial institutions before the first loan can be made.
~~~
For The BRICS Bank, A Tough Road Ahead By RUSSELL GREEN
The announcement of a new BRICS Bank displays the desire of emerging economies to move away from Washington D.C.-style lending institutions.
But between India’s bureaucratic efficiency and China’s indifference to humanitarian, environmental and regional concerns, they resemble John F. Kennedy’s tart characterisation of the very place they hope to leave behind.
Much work lies ahead for the creators of these new multilateral financial institutions before the first loan can be made.
~~~
How were they able to agree?
Simply reaching sufficient agreement to announce the new BRICS Bank represents a significant achievement for the six-year-old BRICS group. While it may seem silly to organise a serious international grouping based on a clever acronym, the BRIC countries are the four largest economies in the developing world. They have economic heft, but do they have much in common?
Unlike, say, OPEC, their economic fundamentals differ dramatically. Russia, Brazil and South Africa export different commodities, while China exports manufactured goods and India exports services. Two are current account surplus and three are deficit countries.
There may be value in giving each member equal voting rights in the institution to avoid concerns about Chinese domination, but it may not be practical
What they most need to succeed is trust. Russia and India have long histories of conflict with China. Brazil and Russia are not famous for being creditworthy. South Africa is a solid neutral party, but also, frankly, a lot less significant than the other members. So apparently their joint desire to plant a flag on the global economy sufficiently overcame mutual differences.
Escaping Western hegemony
What does it mean to be freed of the dominance of developed economies for a development bank? Where have these countries disagreed with developed countries on World Bank policy, for instance?
The preponderance of the friction on lending policy at the International Financial Institutions (IFIs) reflects typical lender-borrower conflict. Developed countries, most often net lenders, want high standards to make sure money is used responsibly and repaid. The developing countries, most often net borrowers, resent outsiders imposing conditions on the use of money inside their own country.
Any lender must pay attention to prudential concerns to survive. But given business practices in the BRICS — especially where government is involved — this cannot be taken for granted. The BRICS governments have not always been enthusiastic about World Bank scrutiny and transparency in the past. They must be vigilant to ensure that BRICS Bank money is used wisely and gets repaid.
Developed countries have also imposed high-minded lending values, the benefit of which can be more reasonably debated. High environmental standards, for instance, may feel like a luxury that poor borrowing countries cannot afford. Some Western-imposed mandates feel more like development fads. Most are legitimate values that the BRICS should aspire to follow.
If the BRICS are comfortable with lowering their lending standards I do not doubt they will find plenty of projects to fund. But if they are, it is best that the existing IFIs are not affiliated with it.
If they do maintain high standards, then it is not clear where their comparative advantage lies. As Robert Kahn at Council of Foreign Relations (CFR) rightly identified, the World Bank and regional development banks largely fill current demand.
From what has been announced, the BRICS Bank will take a very democratic approach to governance by giving each member equal voting rights. Undoubtedly there is value in such an equal arrangement for symbolic solidarity, as well as to avoid concerns about Chinese domination.
But is it practical? The allocation of vetoes matters. If equal vote means equal veto power, like in the UN Security Council, the institution may be doomed.
Despite its shortcomings, this arrangement may be the only way to overcome their mutual trust deficit. Mihir Sharma has already pinned the BRICS Bank as a vehicle for the Chinese to commandeer the friendlier public image of the three southern BRICS as a front for China’s foreign economic policy.
On the other hand, can an institution survive being funded primarily by China and Russia, the only two BRICS with excess reserves, when their influence is no greater than any other member? If adequate checks are put in place to prevent Chinese dominance, will China remain interested in this project?
This works as long as they see long-term value in the institution. U.S. taxpayers would not accept such a bargain, but China and Russia have less need to answer to their own taxpayers.
Unanswered questions
The BRICS clearly want something tangible to demonstrate their global prominence and the power of non-Western values. Yet the new BRICS Bank faces two critical tensions. The first pits the desire to be free of Western-imposed constraints on lending, versus the need for prudential lending. The second sets the high-minded desire for equality of governance against the reality that lack of Chinese dominance may result in institutional neglect by its primary benefactor.
While the BRICS Bank project was put together in an impressively short two years, most of the difficult questions remain unanswered.
Simply reaching sufficient agreement to announce the new BRICS Bank represents a significant achievement for the six-year-old BRICS group. While it may seem silly to organise a serious international grouping based on a clever acronym, the BRIC countries are the four largest economies in the developing world. They have economic heft, but do they have much in common?
Unlike, say, OPEC, their economic fundamentals differ dramatically. Russia, Brazil and South Africa export different commodities, while China exports manufactured goods and India exports services. Two are current account surplus and three are deficit countries.
There may be value in giving each member equal voting rights in the institution to avoid concerns about Chinese domination, but it may not be practical
What they most need to succeed is trust. Russia and India have long histories of conflict with China. Brazil and Russia are not famous for being creditworthy. South Africa is a solid neutral party, but also, frankly, a lot less significant than the other members. So apparently their joint desire to plant a flag on the global economy sufficiently overcame mutual differences.
Escaping Western hegemony
What does it mean to be freed of the dominance of developed economies for a development bank? Where have these countries disagreed with developed countries on World Bank policy, for instance?
The preponderance of the friction on lending policy at the International Financial Institutions (IFIs) reflects typical lender-borrower conflict. Developed countries, most often net lenders, want high standards to make sure money is used responsibly and repaid. The developing countries, most often net borrowers, resent outsiders imposing conditions on the use of money inside their own country.
Any lender must pay attention to prudential concerns to survive. But given business practices in the BRICS — especially where government is involved — this cannot be taken for granted. The BRICS governments have not always been enthusiastic about World Bank scrutiny and transparency in the past. They must be vigilant to ensure that BRICS Bank money is used wisely and gets repaid.
Developed countries have also imposed high-minded lending values, the benefit of which can be more reasonably debated. High environmental standards, for instance, may feel like a luxury that poor borrowing countries cannot afford. Some Western-imposed mandates feel more like development fads. Most are legitimate values that the BRICS should aspire to follow.
If the BRICS are comfortable with lowering their lending standards I do not doubt they will find plenty of projects to fund. But if they are, it is best that the existing IFIs are not affiliated with it.
If they do maintain high standards, then it is not clear where their comparative advantage lies. As Robert Kahn at Council of Foreign Relations (CFR) rightly identified, the World Bank and regional development banks largely fill current demand.
From what has been announced, the BRICS Bank will take a very democratic approach to governance by giving each member equal voting rights. Undoubtedly there is value in such an equal arrangement for symbolic solidarity, as well as to avoid concerns about Chinese domination.
But is it practical? The allocation of vetoes matters. If equal vote means equal veto power, like in the UN Security Council, the institution may be doomed.
Despite its shortcomings, this arrangement may be the only way to overcome their mutual trust deficit. Mihir Sharma has already pinned the BRICS Bank as a vehicle for the Chinese to commandeer the friendlier public image of the three southern BRICS as a front for China’s foreign economic policy.
On the other hand, can an institution survive being funded primarily by China and Russia, the only two BRICS with excess reserves, when their influence is no greater than any other member? If adequate checks are put in place to prevent Chinese dominance, will China remain interested in this project?
This works as long as they see long-term value in the institution. U.S. taxpayers would not accept such a bargain, but China and Russia have less need to answer to their own taxpayers.
Unanswered questions
The BRICS clearly want something tangible to demonstrate their global prominence and the power of non-Western values. Yet the new BRICS Bank faces two critical tensions. The first pits the desire to be free of Western-imposed constraints on lending, versus the need for prudential lending. The second sets the high-minded desire for equality of governance against the reality that lack of Chinese dominance may result in institutional neglect by its primary benefactor.
While the BRICS Bank project was put together in an impressively short two years, most of the difficult questions remain unanswered.
|
These tensions — critical to the bank’s viability — will
not be easily resolved. I expect it will be several years before the details
are sufficiently ironed out for the BRICS Bank to open its doors.
(Russell Green is the Will Clayton Fellow for International Economics at Rice University’s Baker Institute and a former U.S. Treasury official.) http://www.thehindu.com/opinion/op-ed/for-the-brics-bank-a-tough-road-ahead/article6238656.ece |
Post By BigDog-OH Brought From Intel4u Part 3 of
3
How Should the United States Respond to BRICS? By David Thornton | July 22, 2014
While the U.S. economy continues to shrink slowly, several prominent countries are considering lessening their dependence on the U.S. dollar. Of course, this does not bode well for US economic interests.
Several of the world’s leading countries are forming a coalition designed to relieve much of their reliance on the West. Brazil, Russia, India, China, and South Africa (BRICS) are the five leading countries that have united to form a reserve banking system that will lessen their reliance on the US Dollar and create “a more multi–polar world.”
~~~
How Should the United States Respond to BRICS? By David Thornton | July 22, 2014
While the U.S. economy continues to shrink slowly, several prominent countries are considering lessening their dependence on the U.S. dollar. Of course, this does not bode well for US economic interests.
Several of the world’s leading countries are forming a coalition designed to relieve much of their reliance on the West. Brazil, Russia, India, China, and South Africa (BRICS) are the five leading countries that have united to form a reserve banking system that will lessen their reliance on the US Dollar and create “a more multi–polar world.”
~~~
[1] Recently, leaders
from each of the BRICS countries convened in Brazil to agree on the development
of the $100 billion BRICS Development Bank.
[2] According to Alonso Soto, “The money would be invested in infrastructure projects within BRICS countries, including the construction of roads, bridges, and airports.”
[3] Many expect the fund to be operational by the time the BRICS summit meets next year in Russia.
[4] In the United States, however, economic policy continues to lack much-needed reform as the national debt continues to accumulate. Molly Elgin-Cossart analyzes the BRICS summit in Brazil and offers advice on what the U.S. stance should be in addressing this rising economic partnership.
Elgin-Cossart writes that the US should seriously consider restructuring its policies concerning the NSA and intelligence gathering in addition to pursuing economic reforms.
[5] Some countries have vocalized their disapproval of the encroaching spying by the U.S. In an effort to stabilize growing tensions between foreign countries, the U.S. should retrace some of its stances on what are acceptable intelligence gathering techniques in order to prevent possible strain in foreign trade.
For example, several prominent U.S. technology firms, such as IBM Corp, have reported weaker sales in China as a result of U.S. cyber spying.
[6] While some may disapprove of the BRICS reserve fund, monetary prosperity throughout the world will grow once the U.S. takes economic and trade reforms seriously.
First, the U.S. needs to revise the corporate tax rate. It is critical for the U.S. to rethink its corporate tax laws which disincentivize many U.S. and foreign companies from placing their headquarters, research and development centers, and jobs within the United States.
Michael J. Graetz describes how the U.K., Ireland, and Canada have become favored countries for major corporations due to their low business income tax rates.
[7] According to Graetz, the U.S. “has the highest statutory corporate rate in the Organization for Economic Cooperation and Development,” which is currently 35%.
[8] With improved corporate tax reforms, the U.S. will likely grow its revenue, which, in return, will provide more opportunities for the United States to trade and contribute more in aiding foreign countries in need.
Second, the United States needs to address its ever growing trade deficit, which is currently calculated at around -$10.347 trillion.
[9] Michele Nash-Hoff claims that “our 20-year total trade deficit with China since 1994 is a staggering -$3.287 trillion.”
[10] According to Robert E. Scott, America’s trade deficit with China between 2001 and 2011 resulted in a loss of 2.7 million U.S. jobs.
[11] It is critical that the U. S. government addresses this issue and come together to formulate trade reforms that will benefit the American people. With a growing trade deficit, the United States continues to weaken its economy and lessen its effectiveness in spreading monetary prosperity throughout the world.
Given the present political atmosphere in Washington, one may not place too much faith in the U.S. remaining the world’s leading economic powerhouse with the strongest currency. Concerning BRICS, it will be interesting to see how this upcoming reserve fund affects US fiscal policies in the years to come.
Notes
[1] “BRICS establish $100bn bank and currency reserves to cut out Western dominance,” RT, July 15, 2014, accessed July 15, 2014, http://rt.com/business/173008-brics-bank-currency-pool/
[2] Ibid.
[3] Alonso Soto, “BRICS investment fund likely to have $10bln initial capital-source,” Reuters, July 15, 2014, accessed July 15, 2014, . http://in.reuters.com/article/2014/07/15/brics-summit-investment-fund-idINKBN0FK1SV20140715
[4] Ibid.
[5] Molly Elgin-Cossart, “What to watch at the BRICS summit in Brazil,” Center for American Progress, July 14, 2014, accessed July 15, 2014, http://www.americanprogress.org/issues/security/news/2014/07/14/93801/what-to-watch-at-the-brics-summit-in-brazil/
[6] Michael Martina and Matthew Miller, “U.S. firms brace for China backlash over cyber spying charges,” Reuters, May 20, 2014, accessed July 19, 2014,
http://www.reuters.com/article/2014/05/20/cybercrime-usa-china-business-idUSL3N0O62NU20140520
[7] Michael J. Graetz, “Inverted Thinking on Corporate Taxes: Instead of trying to bar U.S. companies from going overseas, why not make America more hospitable?” Trade Reform, July 16, 2014, accessed July 18, 2014, . http://www.tradereform.org/2014/07/inverted-thinking-corporate-taxes-instead-trying-bar-u-s-companies-going-overseas-make-america-hospitable/
[8] Ibid.
[9] Michele Nash-Hoff, “Trade Deficit Would Shrink with Stroke of a Pen,” Trade Reform, July 16, 2014, accessed July 19, 2014, http://www.tradereform.org/2014/07/trade-deficit-shrink-stroke-pen
[2] According to Alonso Soto, “The money would be invested in infrastructure projects within BRICS countries, including the construction of roads, bridges, and airports.”
[3] Many expect the fund to be operational by the time the BRICS summit meets next year in Russia.
[4] In the United States, however, economic policy continues to lack much-needed reform as the national debt continues to accumulate. Molly Elgin-Cossart analyzes the BRICS summit in Brazil and offers advice on what the U.S. stance should be in addressing this rising economic partnership.
Elgin-Cossart writes that the US should seriously consider restructuring its policies concerning the NSA and intelligence gathering in addition to pursuing economic reforms.
[5] Some countries have vocalized their disapproval of the encroaching spying by the U.S. In an effort to stabilize growing tensions between foreign countries, the U.S. should retrace some of its stances on what are acceptable intelligence gathering techniques in order to prevent possible strain in foreign trade.
For example, several prominent U.S. technology firms, such as IBM Corp, have reported weaker sales in China as a result of U.S. cyber spying.
[6] While some may disapprove of the BRICS reserve fund, monetary prosperity throughout the world will grow once the U.S. takes economic and trade reforms seriously.
First, the U.S. needs to revise the corporate tax rate. It is critical for the U.S. to rethink its corporate tax laws which disincentivize many U.S. and foreign companies from placing their headquarters, research and development centers, and jobs within the United States.
Michael J. Graetz describes how the U.K., Ireland, and Canada have become favored countries for major corporations due to their low business income tax rates.
[7] According to Graetz, the U.S. “has the highest statutory corporate rate in the Organization for Economic Cooperation and Development,” which is currently 35%.
[8] With improved corporate tax reforms, the U.S. will likely grow its revenue, which, in return, will provide more opportunities for the United States to trade and contribute more in aiding foreign countries in need.
Second, the United States needs to address its ever growing trade deficit, which is currently calculated at around -$10.347 trillion.
[9] Michele Nash-Hoff claims that “our 20-year total trade deficit with China since 1994 is a staggering -$3.287 trillion.”
[10] According to Robert E. Scott, America’s trade deficit with China between 2001 and 2011 resulted in a loss of 2.7 million U.S. jobs.
[11] It is critical that the U. S. government addresses this issue and come together to formulate trade reforms that will benefit the American people. With a growing trade deficit, the United States continues to weaken its economy and lessen its effectiveness in spreading monetary prosperity throughout the world.
Given the present political atmosphere in Washington, one may not place too much faith in the U.S. remaining the world’s leading economic powerhouse with the strongest currency. Concerning BRICS, it will be interesting to see how this upcoming reserve fund affects US fiscal policies in the years to come.
Notes
[1] “BRICS establish $100bn bank and currency reserves to cut out Western dominance,” RT, July 15, 2014, accessed July 15, 2014, http://rt.com/business/173008-brics-bank-currency-pool/
[2] Ibid.
[3] Alonso Soto, “BRICS investment fund likely to have $10bln initial capital-source,” Reuters, July 15, 2014, accessed July 15, 2014, . http://in.reuters.com/article/2014/07/15/brics-summit-investment-fund-idINKBN0FK1SV20140715
[4] Ibid.
[5] Molly Elgin-Cossart, “What to watch at the BRICS summit in Brazil,” Center for American Progress, July 14, 2014, accessed July 15, 2014, http://www.americanprogress.org/issues/security/news/2014/07/14/93801/what-to-watch-at-the-brics-summit-in-brazil/
[6] Michael Martina and Matthew Miller, “U.S. firms brace for China backlash over cyber spying charges,” Reuters, May 20, 2014, accessed July 19, 2014,
http://www.reuters.com/article/2014/05/20/cybercrime-usa-china-business-idUSL3N0O62NU20140520
[7] Michael J. Graetz, “Inverted Thinking on Corporate Taxes: Instead of trying to bar U.S. companies from going overseas, why not make America more hospitable?” Trade Reform, July 16, 2014, accessed July 18, 2014, . http://www.tradereform.org/2014/07/inverted-thinking-corporate-taxes-instead-trying-bar-u-s-companies-going-overseas-make-america-hospitable/
[8] Ibid.
[9] Michele Nash-Hoff, “Trade Deficit Would Shrink with Stroke of a Pen,” Trade Reform, July 16, 2014, accessed July 19, 2014, http://www.tradereform.org/2014/07/trade-deficit-shrink-stroke-pen
[10] Ibid.
[11] Robert E. Scott, “Trading away the manufacturing advantage: China trade drives down U.S. wages and benefits and eliminates good jobs for U.S. workers,” Economic Policy Institute, September 30, 2013, accessed July 19, 2014,
http://www.epi.org/publication/trading-manufacturing-advantage-china-trade/
[11] Robert E. Scott, “Trading away the manufacturing advantage: China trade drives down U.S. wages and benefits and eliminates good jobs for U.S. workers,” Economic Policy Institute, September 30, 2013, accessed July 19, 2014,
http://www.epi.org/publication/trading-manufacturing-advantage-china-trade/
1 comment:
THE REPUBLIC of SOUTH AFRICA and the GOVERNMENT of SOUTH AFRICA are both SEC registered Corporations in Washington DC. The major SA Banks namely THE SA RESERVE BANK (regulated by IMF, BIS), STANDARD BANK and ABSA Bank (Amalgamated Banks of South Africa) are also regulated by the SEC. This can be validated by anyone with access to the SEC website. As is the case with Barack Obama, Jacob Zuma is the CEO of the aforementioned SOUTH AFRICAN Corporations or popularly known as the President of SOUTH AFRICA as well as the ANC lately (after infiltration) a communist political party being overseen by Luthuli House in Johannesburg, Gauteng. (Sauron the necromancer, Lord of the Rings comes to mind) The Democratic Alliance is another private company of which Helen Zille is the leader and that is popular amongst the more liberal, materialistic and confused mind-controlled portion of the country. Other structures that are foundational to South Africa's economy are the JSE, Anglo-American, etc. It is hard to believe that real change that will release humanity from slavery is at work. Input from ordinary citizens were never considered apart from tremendous mass media activity we all woke up the next morning that we are now part of BRICS. Tax collection and the SA RESERVE BANK as well as inflation (inherent to Fiat currency and Forex control - cheap resources) continue as usual. While BRICS was taking shape the country was visited by 90 odd world leaders and their entourages with Mandela's funeral (6 months late) Even Clinton and Bush and Obama attended and toured other parts of Africa. One would think that these Crown (City of London, BOE) run banks would protest but my ears are straining.
South Africa is part of the UNITED STATES INC. Please love us.
Interested parties studying the phenomenon of BRICS may connect with www.newera.org.za or www.ubuntuparty.org.za in this regard.
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