This Greek tragedy has shown that the BRICS New Development Bank (NDB), which was launched at a summit in Ufa, was long overdue. While the shareholders of the New Development Bank debated questions about the quantity of capital and the size of insurance premiums, yet another country fell victim to the financial vultures. An alternative BRICS organization could save the Greek nation from a public flogging at the hands of the ECB and IMF.
According to reports from Ufa, where the seventh summit of the leaders of the BRICS states recently ended, an additional source of financing will become available by early 2016. This new mechanism will provide funding for projects without tethering it to the most basic requirements of global financial institutions: to fully expose a country’s economy to multinational corporations and to accept the neoliberal political agenda.
Needless to say, the implementation of these two IMF mandates is often tantamount to surrendering a nation’s sovereign economy to the economic dictates of the United States and the subsequent “dollarization” of all liquid assets. The entities that were created as global platforms for all countries now openly impose the monetary and financial policy of the American leaders. That mechanism was developed during the harsh imposition of economic liberalization in Latin America (ask Evo Morales) and the former Soviet Union in the 1990s and 2000s. Then, as now in Athens, the financial bloodletting was accompanied by a chorus of derisive commentary from oracles of economics, suggesting that perhaps the populace of the subject countries needed to roll up their sleeves and work a little harder.
The mainstream business press applauds Alexis Tsipras, because he values a good game with his creditors over the interests of his own people. To improve its “investment climate,” Greece is now in all seriousness offering to bring in another hundred consultants with Western MBAs and sell another island to Johnny Depp or even Warren Buffet in order to improve its image. Worked all your life, yet looking at a pension of less than 100 euros a month? But for that you get to live next door to Johnny Depp himself! As history has shown time and again, we cannot learn from someone else’s mistakes.
This is why Muhammad Yunus – the 2006 recipient of the Nobel Peace Prize – has stated that, although the NDB will be tempted to become a copy of the World Bank, it “must resist this from day one.” Mr. Yunus suggests focusing on three “zeros” as top priorities – zero poverty, zero unemployment, and zero harm to the environment. Peter Koenig, a former economist at the World Bank, has long said that that institution is no model of best practices for a new “mutual aid society” for developing countries. “The BRICS bank marks a major step toward de-dollarization and a new monetary system. It should replace the western-dominated predatory casino scheme,” said Koenig in a reference to the World Bank.
The concept of “social business and banking,” which has been successfully tested by Muhammad Yunus in Bangladesh, could form the theoretical basis of the NDB. There one finds a focus on involving youth in specially created businesses with limited licenses, aimed at solving social problems such as unemployment. The bank also plans to extend credit to major infrastructure projects in the energy industry.
Among the reasons cited for the accelerated creation of a financial “safety net” for the BRICS countries is the US veto on the plans to reform the IMF. Washington has refused to recognize the new facts of life and increase the economic weight of the five key emerging markets in that organization. In light of the recent problems in the Chinese stock market, it is clear that the founding nations want to shield their economies from the risk of being slapped by the “invisible hand” of the international financial institutions. The NDB could offer a mechanism to make it simpler to settle accounts using national currencies.
The organization’s target parameters were written as if they had the Greeks specifically in mind. Greece, which is deeply mired in unrelenting negotiations with its creditors, should not write off the new opportunities that will open up in early 2016.
Filed under: Political Economy Tagged: BRICS, monetary policy, world crisis
