Compared with the combined $3 trillion budgets for the International Monetary Fund and the World Bank, the efforts of emerging economies to create an alternative development bank are embryonic. But they are still important. This week, on the heels of the World Cup, leaders of Brazil, Russia, India, China, and South Africa — the so-caled BRICS nations — met in Fortaleza, Brazil, to launch a bank of $50 billion of capital stock and pledges totalling $100 billion to finance infrastructure projects in needy countries and help them weather financial crises.
China, Russia, Brazil, and India are now in the world’s top 10 largest economies and account for 40 percent of the world’s population. They’re starting the bank in part because they lack consummate voting leverage in the IMF. The emerging countries bristle at a Western-led financial system that they say often imposes difficult loan conditions on governments and pays more lip service to fighting global poverty than funds to eradicate it. If they are successful, the new BRICS-led institution could put pressure on the World Bank and IMF to respond more fully to the concerns of debtor nations.
Still, the BRICS nations are hardly equal partners. They have wildly different political systems. China, whose GDP is greater than that of the other four nations combined, may wield disproportionate power in the new bank, and Beijing’s past willingness to provide development assistance without conditions raises the possibility that corrupt and oppressive governments could use the new institution’s help against their own citizens’ interest. Still, the availability of more development assistance for the world’s neediest countries is to be applauded — and could also prod the world’s rich nations to do more.