Yellow BRIC road
Among the more poorly thought out foreign policy initiatives of the Indian government, one of the mitigated disasters has been the proposed BRICS bank. The New Delhi foreign policy establishment has taken to blaming the Indian finance ministry for the idea, but the external affairs ministry had to have gone along with the idea.
What’s wrong with the BRICS bank? Answer: if it is to become large enough to serve a useful purpose, it will become a means by which India subsidizes the soft power of China.
Development banks have their uses, but it is important to realize they are largely extensions of the international economic policies of great powers. The World Bank and the IMF reflect the influence of the US and the European Union. The Asian Development Bank has traditionally been part of Japan’s soft power.
The next country in line for developing such an institution for its own power and glory should logically be China. So far though, Beijing has preferred to simply dole out loans in a bilateral fashion. But the BRICS banks may be its first move into the development bank space.
Any BRICS bank, if it follows the multilateral financial institution norm, will apportion votes on its board according to the amount of money they give to its capital. China, wealthier than all the other BRICS countries combined, would inevitably be able to take control of the board.
The messy solution to keeping Beijing at bay has been to devise a capital structure by which each of the BRICS countries contributes an equal amount of money. But this will limit the bank to the contribution capacity of South Africa, the poorest BRICS member. Far from being a rival to the World Bank, as some third world types have proposed, the BRICS bank will be destined to be a runt of a development bank.
It is not yet clear as to why India first came up with the idea — or why it has since begun going slow on the bank for fear of paying for an extension of Sinic influence with Indian funds.
One theory is that the Indian finance ministry, fretting at the fact India will soon be ineligible for World Bank loans because it is on the verge of being declared a middle-income state, jumped at the idea of another development bank in the game. And one where India would have a decisive say in the rules.
If so, it was short-sighted move. But the BRICS is here to stay, though it is not clear if it will ever be more than a shallow organisation waiting for the proper moment of history to become something more. Or, at the very least, there is sufficient political trust between the major members — seriously lacking right now — to have them agree on a real agenda.