New World Order? BRICS "New Development Bank"

We've heard all that before, unfortunately, BRICS.

Grand plans to supplant the (American-designed) postwar global financial architecture lie thick on the ground. As I noted in 2007, poor countries have championed the G-77, Non-Aligned Movement (NAM), New International Economic Order (NIEO), and UN Conference on Trade and Development (UNCTAD) as alternatives giving poor countries a larger voice in global economic governance. Interestingly enough, the BRICs grouping which was formed out of Goldman Sachs' Jim O'Neill acronyms has had regular meetings discussing reform of the world's financial architecture. (South Africa has been included in these discussions, hence BRICS instead of BRICs.) Wouldn't it be nice if poor countries could look out for one another instead of having to bow to Western-led interests as prescribed by the World Bank and IMF?

In the most recent BRICS meeting in Fortoleza, Brazil, participants have upped the (rhetorical) ante in proposing alternatives to not one but both Bretton Woods institutions the World Bank and the IMF. In place of the World Bank, consider this description of the supposedly forthcoming, Shanghai-based New Development Bank:

The New Development Bank, as it will be called, is intended to finance infrastructure projects in the founding members of Brazil, Russia, India, China and South Africa, and in other emerging-market countries as well. The NDB still needs approval from each Brics countries' lawmakers, which could take years.

But when it is finally set up, the bank will provide an alternative source of financing for the Brics and other emerging markets and give them much greater control over funding decisions that affect them directly [read: instead of having Westerners ultimately decide]. 

The stated cause of plans to accelerate the so-called NDB's formation is delayed reform of the Bretton Woods institutions:

The new institution, whose first chief executive will be from India, will start out with capital of $50 billion, to be paid in equally by all five Brics countries. Capital is planned to grow eventually to $100 billion, according to the memorandum released after the meeting in Brazil of the heads of government of the five countries.

The Brics have been trying for years to reform the International Monetary Fund and the World Bank, the backbone of the world's global financial structure, to give emerging markets more influence over those institutions, but with little success. "In the IMF and the World Bank, the U.S. and a handful of allies really do make almost all the decisions, and the vast majority of the world…doesn't really have a voice," said Mark Weisbrot, co-director of the Center for Economic and Policy Research, in Washington, D.C. 

Also consider the mooted IMF alternative, the Contingent Reserve Arrangement:

In addition to the new bank, a new monetary fund was also launched at the Fortaleza summit. The five leaders signed a memorandum establishing a Contingent Reserve Arrangement (CRA) - a $100 billion contingency fund, which member states can draw on in financial emergencies when their foreign exchange reserves become dangerously depleted. The BRICS countries currently have the world's largest foreign currency reserves, and the new institution offers an opportunity to invest those savings at a profit. China contributed $41 billion to the capital stock; India, Brazil and Russia each paid in $18 billion, and South Africa's share is $5 billion.

The CRA is meant to provide an alternative to International Monetary Fund's emergency lending. In the CRA, emergency loans of up to 30 percent of a member nation's contribution will be decided by a simple majority. Bigger loans will require the consent of all CRA members.

After hearing dozens of these plans being aired without having much to show for in terms of results, my take here is simple: I will believe them when I see the NDB and CRA fully funded by the BRICS. Climate change has probably been exacerbated by so much hot air about South-South groupings (see the institutions mentioned in the first paragraph). Unless these countries really put their money where their mouths are at, it's better to consider these Bretton Woods alternatives with a grain of salt.