<div><em><strong>Sutanu Guru</strong> looks at how "emerging" economies are dismantling the American dominated global financial architecture</em></div><div> </div><div>In 1944, America officially replaced Britain as the global financial superpower at Bretton Woods when the formalities to launch the World Bank and the International Monetary Fund were finalized. This week, that monopoly of Western powers will get another jolt when finance ministers of the five BRICS (Brazil, Russia, India, China and South Africa) countries along with their central bank heads will complete all formalities to launch the New Development Bank.</div><div> </div><div>Earlier christened as the BRICS Bank, the new name is designed to expand the ambit of the bank to other nations. One of the best known Indian bankers, K.V. Kamath is the designated head of NDB. This comes just a week or so after a glittering ceremony in Beijing where 49 nations joined China to announce the launch of the Asian Infrastructure Investment Bank. China will provide 30% of the paid up capital of $100 billion and control 26.6% of the vote with a clear veto power. India will be the second largest shareholder in AIIB with a stake of 8.52%. Incidentally, both USA and Japan are not members of the AIIB. And by definition, the G-7 nations cannot be members of BRICS.</div><div> </div><div>For decades, there has been a clamor from "emerging" nations to end the virtual stranglehold of traditional global powers over global institutions. For example, there have been persistent calls to reform the United Nations and add more countries as permanent members of the currently five-member UN Security Council. Simultaneously, there have been demands to ease the complete dominance of financial institutions like IMF, World Bank and Asian Development Bank by the G-7 nations. For more than two decades, there has been talk without any substantive change on the ground. But the recent launch of two brand new global financial institutions in the form of AIIB and NDB indicate that emerging economies are no longer willing to wait for crumbs from the traditional powers. This has been articulated clearly in an interview given to the newspaper Mint by Malose W Mogale, the deputy High Commissioner of South Africa to India when he said, "Our argument is that the world can't remain the same after 70 years...The West has realized that if they don't change, there will be an alternative". </div><div> </div><div>Geopolitical considerations aside, it is the financial implications that will have resonance. Under what is now famous (or notorious) as the Washington Consensus, institutions like IMF and World Bank have been accused of trying to impose their own version of capitalism on countries while providing financial assistance. More often than not, it has led to economic mayhem and financial ruin for local populations. In unusual gestures of mea culpa, both the IMF and the World Bank have admitted in recent times that their priorities were perhaps skewed. The AIIB and the NDB promise to provide financial assistance to countries in a manner that suits their infrastructure needs and long term goals rather than imposing uniform conditions on everyone. As the latest fiasco in Greece shows, going to the IMF with a hat in hand means adopting "austerity" measures that might lead local populations to revolt. </div><div> </div><div>Sure, the dominance of the western powers is not going to vanish. Definitely not in the near future. But the monopoly that was established by America and the Second World War allies at Bretton Woods in 1944 is gone. That is definitely good news.</div>
