Shall We Bank on BRICS, A Coalition of Unequals?

I wrote a short opinion piece on the politics around the BRICS Bank for the Economic Times.  I argued that China is likely to dominate the BRICS because of the disparity in wealth between China and the other BRICS.


The BRICS (Brazil, Russia, India, China and South Africa) coalition is attempting to move from being a talk-shop of wannabe great powers into something more substantial by creating a BRICS Bank.

Speaking at the BRICS summit in Durban, PM Manmohan Singh said that global institutions should reflect "contemporary realities", singling out in particular the IMF and the UN Security Council.

It is understandable that the rising powers of the BRICS want to change global institutions to reflect their new status. But in complaining about the current US dominated global structure, some of the key BRICS countries forget that "contemporary realities" are not necessarily in their favour. BRICS is not a coalition of equals: China dominates it.

The disparity between China and other BRICS countries is startling. China's GDP, at more than $7 trillion, is greater than the rest of BRICS put together. This has consequences. The balance of wealth between countries determines the shape and fate of international institutions. Strong states create such institutions in order to serve their interests and these institutions rise and fall in step with the fate of their creators.

For example, as the US took on a global role after 1945, it created a host of institutions. This included the UN system for management of general international order, the Bretton Woods system for the management ofglobal economy and the nuclear non-proliferation order for the management of a particularly dangerous security threat. Not surprisingly, as the US declines slowly, these institutions are all in trouble.

Beijing's Big Account

The consequences should be clear. Any BRICS bank, or financial or political institution that BRICS builds will be dominated by China. Reports suggest that there are disagreements in the group about the corpus fund for the bank and the Contingent Reserve Arrangement to deal with liquidity crises. China appears to be willing to contribute the bulk of the funds, but is facing objections from India and Russia which are worried about what this might mean for decision-making within these new institutions. They are right to be worried: if China ends up paying a disproportionate amount of the capital for these institutions they will expect a bigger say in how these institutions are run.

Disparity of Power

Such Chinese efforts are likely to lead to dissension within BRICS. For Beijing, BRICS represents the latest attempt at creating institutions to promote its interests. But while China's growth has been dramatic, it does not yet come close to the dominance that the US enjoyed. China's GDP is still only half that of the US. And while it enjoys great advantage within BRICS, Beijing cannot afford to throw its weight around because its partners still have other choices. BRICS was successful so far because they limited themselves to complaining about the global order. As aspiring great powers, all of them had reasons to be aggrieved about being "denied their place in the sun", as the Germans used to characterise it in the late 19th century when they chafed under British dominance.

As long as they focused outward, BRICS did not have to worry about the disparity of power between China and the others. India shares with BRICS countries an antipathy towards a global order that does not give India the importance it thinks it deserves. But alternative world orders and institutions are equally likely to be dominated by the powerful, this time China. If BRICS countries want to build an alternative order, they have to face up to the consequence of the disparity of power within BRICS.