Dani Rodrik's weblog: What the BRICS could do

What the BRICS could do

My newest Project Syndicate column is on the BRICS. These countries – Brazil, Russia, India, China, and South Africa – have little in common. Most prognostications suggested they would agree on very little. Yet they have surprised the world by proposing a New Development Bank to focus on infrastructure finance.

This is a beginning, but is it a useful one? I suggest not.

What the world needs from the BRICS is not another development bank, but greater leadership on today’s great global issues. The BRICS countries are home to around half of the world’s population and the bulk of unexploited economic potential. If the international community fails to confront its most serious challenges – from the need for a sound global economic architecture to addressing climate change – they are the ones that will pay the highest price.

Yet these countries have so far played a rather unimaginative and timid role in international forums such as the G-20 or the World Trade Organization. When they have asserted themselves, it has been largely in pursuit of narrow national interests. Do they really have nothing new to offer?

The global economy has operated so far under a set of ideas and institutions emanating from the advanced countries of the West. The United States gave the world the doctrine of liberal, rule-based multilateralism – a regime whose many blemishes highlight the lofty principles according to which the system has generally functioned. Europe brought democratic values, social solidarity, and, for all its current problems, the century’s most impressive feat of institutional engineering, the European Union.

But these old powers have neither the legitimacy nor the power to sustain the global order into the future, while the new rising powers have yet to demonstrate which values they will articulate and promote. They have to develop their vision of a new global economy, beyond complaints about its asymmetric power structure. Unfortunately, it is not yet clear whether they have the inclination to rise above their immediate interests in order to address the world’s common challenges.

Their own development experience makes countries like China, India, and Brazil resistant to market fundamentalism and natural advocates for institutional diversity and pragmatic experimentation. They can build on this experience to articulate a new global narrative that emphasizes the real economy over finance, policy diversity over harmonization, national policy space over external constraints, and social inclusion over technocratic elitism.

Read the whole thing here.

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Comments

The recommendation for a new development bank focused on infrastructure finance seems to be a safe bet since most of these countries also face infrastructure problems which is important for growth. According to Global ranking on quality of infrastructure by the World Economic Forum (with 1 for the Best performer and 144 for the Worst) , the overall quality of infrastructure amongst the BRICS was quite low.

South Africa was best performer with rank of 58, followed by China (69), India (87), Russia (101) and Brazil (107).

China has invested about $600 billion in infrastructure and India needs $1.7 trillion investment to meet its growing infrastructure needs over the next decade. Brazil is expected to increase its infrastructure spending by more than 50%.

However, infrastructure alone would not lead to growth. Policies on trade and exchange rate should also been considered.

Posted by: Arinze | April 12, 2013 at 11:13 AM