Brics Bloc Bluster

When it comes to leadership of international institutions, the emerging BRICS economies could be all talk and no action. The leadership post of the International Monetary Fund is vacant, and initially the emerging powers insisted that the board should break from the tradition of naming a European as managing director of the 24-member governing board. That insistence was an empty threat. Brazil, India, China and other emerging economies now hesitate to rally behind a viable candidate from the developing world, and instead negotiate individually with the European candidate for new status, explains Nayan Chanda, YaleGlobal’s editor, in his regular column for Businessworld. For example, China angles for an increased voting share and a deputy managing director slot filled by a Chinese representative. Chanda concludes that the leading emerging powers lack a common vision for global good and instead remain intent on accruing national power. – YaleGlobal

Brics Bloc Bluster

The Brics’ stance on the new IMF chief shows that the grouping has a long way to go for global leadership
Nayan Chanda
Monday, June 20, 2011

For all its preening about representing the new emerging powers, Brics (Brazil, Russia, India, China and South Africa) remains essentially a category on an economist’s spreadsheet. The empty thunder of a joint letter written by the representatives of Brics countries to the IMF, demanding that the new managing director not be a European, has shown it to be a paper tiger. Periodic summits of heads of government and bold communiques do not a political bloc make. The old order is unshaken. Only the chatter about a new order has given its most vocal member some leverage in dealing with the old powers.

The resignation of Dominique Strauss-Kahn revived hopes that the iniquitous practice of electing a European as the managing director of IMF might finally end. Didn’t Jean-Claude Juncker, the head of the Euro group at the organisation, promise at the time Strauss-Kahn was elected that “the next managing director will certainly not be a European”? Well, that was then. Now that Strauss-Kahn has resigned before his term, Europeans want French finance minister Christine Lagarde to succeed a fellow countryman. The fact that the Eurozone needs urgent assistance from the IMF, they argue, makes it natural that a European should be at the helm. The promise of transparency and merit-based election takes a back seat.

That the Europeans are sticking to their candidate should not come as a surprise. But the episode has exposed the hollowness of Brics, the putative representative of the emerging powers. Just after Lagarde announced her candidacy, Brics made world headlines through their joint letter calling for “abandoning the obsolete unwritten convention” by not accepting another European at the head of IMF. But it turned out to be a one-day sensation. The group did not come up with a common candidate. The most eminent candidate possible in the group is India’s Montek Singh Ahluwalia (68) who did not fit the age limit of 65. India perhaps also had a realistic appreciation about its chances of success at this stage. South Africa toyed briefly with a candidacy of its own former finance minister Trevor Manuel before abandoning it.



Russia tossed up a candidate from Kazakhstan, central bank president Grigori A. Martchenko as an afterthought.

China, which had only months earlier hosted a Brics summit, had its own calculation. Although French foreign ministry leaked that China supported Lagarde, Beijing remained silent hoping to cash in on its eventual acceptance of the French candidate. Meanwhile, Brics’ failure to support a candidate from the developing world, Agustín G. Carstens, the governor of Mexico’s central bank, showed what he feared that they would “give in to the European church and treat it as business as usual”.

Lagarde’s two-day visit to China showed how business as usual looks. Beijing clearly was gearing up to support her candidacy and benefit from promises of larger voting shares and influence at the top of the IMF. Lagarde promised that China’s current voting share with the organisation will be raised from 3.65 per cent to 6.4 per cent. There were also hints that China’s Zhu Min might be promoted to first deputy managing director after the impending retirement of the current occupant of the position — US national John Lipsky. At a Beijing press conference, Lagarde was asked whether she would back Zhu should she win. Lagarde replied that she respected and liked Zhu very much and that he would be “fully appropriate” to play a key role in the IMF. China could also expect an easing of pressure to revalue the renminbi. Lagarde noted Beijing’s efforts to allow the currency to appreciate as a “positive movement” and said she hoped it would continue. Brazil and India, who have complained about being hurt by China’s artificially-low currency, could not have been happy.

The serendipitous common UN vote by members of Brics, except South Africa, for action in Libya and the joint statement from China criticising Nato bombing created a false image of a politically united body, as did for a day their joint letter on IMF leadership. But as they lack a common vision, the reality of vast political and economic differences that divides them far outweighs the desire to play the leadership role in a new world. As the Chinese proverb goes, members of Brics may sleep in the same bed, but have different dreams.

 

 

The author is director of publications at the Yale Center for the Study of Globalization, and Editor of YaleGlobal Online.

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