The announcement last week by the leaders of Brazil, Russia, India, China, and South Africa to launch a new international development bank has raised many questions. At their annual summit, hosted in Durban, South Africa, the leaders of these dynamic economies gushed that this was the beginning of increased cooperation and “a structural shift in the global economy.” In a piece published today on ForeignPolicy.com, I ask ten questions about the structure and purpose of a potential BRICS development bank and its implications for international development and the global economy. I write:
Do the BRICS have enough in common to sustain a shared institution?
Maybe. Maybe not. Some lack of consensus is undoubtedly behind the hedging. The BRICS encompass very different political systems — from thriving democracy in Brazil to entrenched oligarchy in Russia — and their economies are little integrated, inherently competitive, and are different in size by orders of magnitude. In 2011, China’s GDP was over $7.3 trillion, about eighteen times larger than South Africa’s economy, the smallest of the BRICS, and three times larger than Brazil’s economy, the second biggest of the BRICS. It’s also unclear to what extent the BRICS share a vision with respect to economic development, other than not being “the West.” Still, while such differences create challenges, success is not impossible. Remember, the economy of the United States dwarfed those of its allies when it created the Bretton Woods institutions in the postwar years. And there was no lack of disagreement about the postwar order among the European powers and Washington, but somehow the Bretton Woods system survived.
You can read the full piece here.