Economic Highlights

New Delhi, 10 July 2015

West Plays Party Pooper

BRICS NEEDS STRONG NEWS SYSTEM

By Shivaji Sarkar

Prime Minister Modi’s condemnation of the West’s highhandedness along-with his call to end sanctions against Russia marks the beginning of global, UN and Breton-Woods institutional reforms. This might lead to the end of centuries of colonial one-upmanship, if not atrocities round the world.

Notably, the BRICS seventh Summit coincided with the release of the 2015 MDG (UN millennium development goal) which highlights an abysmal poverty record. Shockingly, over 1.7 billion people remain without sanitation, 75 per cent children are under-nourished, 1.4 billion live below $ 2 a day, many at $ 1.25 alongside increase in many other deprivation and gender discrimination. This speaks of veiled rise of discrimination and strife due to certain religious intolerance.

Pertinently, many of these issues directly or indirectly were the base for BRICS discussion. Amidst the summit, International Monetary Fund (IMF) also announced the slowing down of global economy (largely western). Questionably, was this routine or deliberate psychological-war to unnerve and desist the new Five powers? Given that IMF failed to check currency speculation.

Besides, just before the Summit, the US started talking to Iran for ending sanctions and engaging with it closely. Is Washington taking note of closer inter-action among the emerging economies --- three of them neighbours --- India, Russia and China?

Importantly, the BRICS Summit has lessons for the West. Plainly, western hegemony has not helped the rest of the world. Its financial institutions even the UN mechanism could not bring better world order.

And the ganging up of the West ensured that whatsoever the condition of their economies, the US dollar, Euro and British pound would control the exchange mechanism and manipulate rates of currencies. Thus making poor nations subsidise rich economies as they get paid peanuts for their products thanks to poor currency rates. Eventually, increasing deprivation in the developing world.

Indeed, the purpose of BRICS is to change this by pro-actively promoting mutual trade in their national currencies. This would gradually reduce the dominance of the dollar. Subconsciously, the inspiration has been taken from the Greek crisis. Remember, Greece did well till it had its own currency drachma and slid when it adopted Euro.

True, it would take some time for the local currency trade (LCT) to succeed as BRICS has to iron out initial hiccups of deciding the exchange rates. It remains to be seen how this helps the rupee regain its position as also how it vies with Chinese yuan-renmibi. Today, one yuan is priced at a little more that Rs 10. As it succeeds, the rupee-trade area is likely to engulf a large part of central Asia, Russia, China and at a later stage south-east Asia.

Undeniably, the domination of the money market by the West virtually made all other currencies pariahs. With the five diverse economies deciding to trade in their own currencies is an attempt to end monopolies. It is an honest, pro-people but difficult move. The West would sharpen its barbs and BRICS might not find it easy to duck, at least, in the near future.

There is no gainsaying, the new development bank (NDB) Asia Infrastructure & Investment Bank (AIIB) BRICS has set up will gradually create the arsenal for freeing these economies. Happily, the NDB has been widely welcomed and is opening up membership. Its first Chairman KV Kamath asserted that if the board approved it could consider helping even Greece!

The $ 100 billion contingency reserve agreement (CRA) would provide additional liquidity protection to member countries during balance of payment problems. Of this, China contributed $ 41 billion, India, Russia and Brazil $ 18 billion each and South Africa $ 5 billion.

Moreover, what BRICS is doing for an alternative to Breton-Woods bodies has in many ways been done by Andean nations in the 1960s with Corporacion Andina de Fomento (CAF) or Development Bank of Latin America; Chiang Mai Initiative in 2000 by ASEAN nations, China, South Korea and Japan; BancoSur or Bank of the South by South American countries.

Further, the rising economic strength of BRICS countries has outpaced increases in their voice at the World Bank and the IMF and South-South economic cooperation has expanded dramatically in recent years. Brazil now has more embassies in Africa than UK does and China has become Africa’s most important trading partner.

Significantly, the value of South-South trade now exceeds North-South trade by some $2.2 trillion --- over one-quarter of global trade. Additionally, low-income countries have also seen unprecedented growth in “South–South” foreign aid with China, Brazil, and India becoming larger donors. Thus, these BRICS institutions are part of the process of greater economic engagement by and among developing nations.

The concern of the West is reflected in the way western news agencies are covering the Summit. They have an overtone of diverse economies from different regions coming together wherein its success is suspect.

Conveniently, overlooking the capacity to form NDB, manage common issues like cyber, climate and energy arenas and even ignore the possibility of BRICS sub-group of India, Brazil, China and South Africa on climate change playing a crucial role at the UN Climate Change Conference in December.

What’s more BRICS countries can resolve bilaterally issues like military intervention, sanctions, terrorism, investment and UN Security Council changes. There are many other emerging common interests.

However, what BRICS has ignored so far is to have its own information order as the West-based system injects bias in news presentation. It needs to set up a strong news dissemination system beyond their national agencies as a pool of national agencies invariably does not succeed. It has to consider setting up a global agency to counter western propaganda for the success of its new reforms agenda.

Yes, there are problems. Trade between BRICS countries is less than $ 320 billion while their trade with US and EU is 6.5 times higher. In many areas, the Five countries compete for a share in the markets, from clothing to aircraft and military equipment. This apart, there are cultural diversities.

In sum, despite this the union of BRICS is a positive move. Whatever doomsayers might say, within BRICS trade between Russia, China and India has increased. Clearly, it has potential to emerge as the third largest economy and change the course of global economy. ---- INFA

(Copyright, India News and Feature Alliance)