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By Global Public Square staff
World leaders came together in Brazil last week to celebrate. And no, this had nothing to do with the World Cup. We’re talking about the 6th annual BRICS summit.
The leaders of all the BRICS nations – that is Vladimir Putin, Narendra Modi, Dilma Rousseff, Xi Jinping and Jacob Zuma – all gathered in Fortaleza, Brazil. And on Tuesday they sent a shot across the bow by announcing a $50 billion bank meant to rival the World Bank, and a $100 billion crisis fund to replace the IMF.
It’s clear why they made this move.
You see, these five nations – Brazil, Russia, India, China and South Africa – now account for more than 40 percent of the world's population, almost 20 percent of the world's total GDP and 17 percent of global trade. Yes, growth in the emerging markets has slowed recently, but these countries have still become a large enough force in the global system that they want a seat at the table.
And that hasn't happened. Their influence in international institutions has lagged behind. Only two of the five BRICS countries have permanent seats at the U.N. Security Council. And their collective voice isn't heard much at all at international economic institutions like the International Monetary Fund (whose head the Europeans appoint) and the World Bank (whose leader is put forth by the United States).
As The Economist points out, China – the world’s largest economy by some measures – has less voting power in the IMF and World Bank than Belgium, the Netherlands and Luxemburg. Remember, China has 1.3 billion people to the less than 30 million people in those three European nations.
The BRICS leaders have complained about this unfair treatment for years. American administrations pushed to give them greater voices and votes. But the small European countries haggled and then the American Congress has been its usual obstructionist force.
Now, instead of continuing to change the old system from within, the BRICS leaders are trying to subvert it. And this subversion comes on the 70th anniversary of Bretton Woods. That was the agreement, signed at a U.N. conference in the wilds of New Hampshire, which spawned the World Bank and the IMF in the first place.
Of course, there is all sorts of squabbling and disagreement amongst the BRICS, but there is one very important thing that they seem to agree on: they envisage an economic future that is both anti-Western, in some sense, and anti-dollar.
Welcome to the new world order, where we have to accommodate the rise of the rest. If the United States and the West don't do that, others will create clubs of their own to counter the existing system.
The IMF has said it will collaborate with the new bank, but is that enough? Well, there’s one tangible thing the U.S. could do as soon as tomorrow: It could pass legislation to modernize and reform the IMF.
The reforms were negotiated in 2010. They are supported by almost all 188 IMF members, and just this April, the G20 gave Congress an ultimatum of sorts: pass the reforms to give emerging countries a greater say by year-end, or we will move forward without you.
Maybe the creation of this BRICS development bank will be just the wake-up call the United States Congress needs. But given that it is the United States Congress, we wouldn't bet on it.