The rise of the South: can BRICS weaken the dominance of the World Bank and IMF?

Who would have expected that the BRICS nations could rise and become the potential rival of the G7 countries, the World Bank and the IMF combined? That once seemingly distant possibility now has real prospects which could change the equilibrium of world politics.

BRICS — an acronym for Brazil, Russia, India, China and South Africa — was supposedly coined by the Chief Economist of Goldman Sachs in 2001, as a reference to the world’s emerging economies. It was then known as BRIC; the “S” came later, when South Africa formally joined the group in 2010.

The group’s first official summit was held in 2009. Back then, the discussion seemed largely abstract. It wasn’t until 2014 that BRICS began taking serious steps towards greater integration, when the nascent alliance, now including South Africa, launched the New Development Bank with seed money of $50 billion. This decision meant that the group was now ready to take its first practical steps in challenging the dominance of the West over international monetary institutions, namely the World Bank and the IMF.

The geopolitical global conflict resulting from the Russia-Ukraine war, has proved to be the driving force behind the massive expansion underway at BRICS, especially as financially powerful countries have started to show interest in the initiative. They include Argentina, the UAE, Mexico, Algeria and, particularly, Saudi Arabia.

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Recent financial reports suggest that BRICS is already the world’s largest gross domestic product (GDP) bloc in the world. It currently contributes 31.5 per cent to the global GDP, ahead of the G7, which contributes 30.7 per cent.

One of the greatest opportunities, and challenges, facing BRICS now is its ability to expand its membership base while maintaining its current growth. The issue of helping new members maintain economic and political independence is particularly vital.

The IMF and World Bank are notorious for basing their financial support of countries, especially in the Global South, on political conditions. This is often justified under the guise of human rights and democracy, although it is related entirely to privatisation and opening markets for foreign investors, for which read Western corporations. As BRICS strengthens, it will have the potential to help poorer countries without pushing a self-serving political agenda, or indirectly manipulating and controlling local economies.

With inflation hitting many western countries, resulting in slower economic growth and causing social unrest, nations in the Global South are taking the opportunity to develop their own economic alternative. This means that groups like BRICS will cease being exclusively economic institutions. The struggle is now very political.

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For decades, the US’s greatest weapon has been the dollar which, with time, stopped being a normal currency per se, and became a commodity. Wars have been fought to ensure that countries like Iraq and Libya remain committed to the dollar. Following the US invasion of Iraq in March 2003, Baghdad returned to selling oil in US dollars. This struggle over the dominance of the dollar was also felt painfully in Venezuela, which has the world’s largest oil reserves and yet was reduced to abject poverty for attempting to challenge the supremacy of Washington and its ubiquitous currency.

Although it will take time, the process of reducing international reliance on the US dollar is now in full swing. On 30 March, Brazil and China announced a trade agreement that will allow them to use their own currencies, the real and the yuan respectively. This step shall prove consequential, for it will encourage other South American countries to follow suit. The move was neither the first of its kind, nor will it be the last.

One of the main decisions taken by finance ministers and central bank governors of the Association of Southeast Asian Nations (ASEAN) at their 30-31 March meeting in Indonesia was to reduce their reliance on the US dollar. They agreed to “reinforce financial resilience… through the use of local currency to support cross-border trade and investment in the ASEAN region.” This too is a game changer.

The BRICS countries are leading the charge and are set to serve as the facilitator of the rearrangement of the world’s economic and financial map.

While the West is busy trying to keep its own economies afloat, it remains wary of the changes underway in the Global South. Washington and other western capitals are worried. They ought to be.

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Following a meeting between US President Joe Biden and 40 African leaders at the White House last December, it was clear that African countries were not interested in taking sides in the ongoing war in Ukraine. Consequently, US Vice President Kamala Harris flew to Africa on 26 March to meet regional leaders with the sole purpose of pushing them away from China and Russia. That effort is likely to fail.

A perfect demonstration of Africa’s refusal to abandon its neutrality was seen at the press conference between Harris and Ghana’s President, Nana Akufo-Addo, on 28 March. “There may be an obsession in America about Chinese activity on the continent,” Akufo-Addo told reporters, “but there is no such obsession here.”

To argue that BRICS is a purely economic group is to ignore a large part of the story. The timing of its expansion; the stern political discourse of its members, potential members and allies; the repeated visits by top Russian and Chinese diplomats to Africa and other regions in the Global South; and so on, all indicate that BRICS has become the South’s new platform for geopolitics, economics and diplomacy.

The more successful that BRICS becomes, the weaker that Western hegemony over the South will be. Although some western politicians and media insist on downplaying the group’s role in shaping the new world order, the change seems to be real and irreversible.

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