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Washington DC Forum: BRICS as a Counterbalance to US and Europe
Written by Dr. William Selig, Deputy Director, UPF Office of Peace and Security Affairs, Washington, DC, USA
Wednesday, October 8, 2014
Washington DC, USA - At the Office of Peace and Security Affairs of UPF International forum held on Oct. 8, 2014 at the Green Room of The Washington Times, government officials, scholars, think tank experts, and Ambassadors for Peace gathered for a discussion on “The BRICS [Brazil, Russia, India China and South Africa] as a Counterbalance to the U.S.-Europe-led International Geopolitical and Financial System.”
Hosted by Dr. Antonio Betancourt, director of the program, and moderated by Dr. Alexandre Mansourov, visiting scholar at the U.S.-Korea Institute at SAIS (School of Advanced International Studies) of Johns Hopkins University, the participants concluded that the creation of the BRICS is a positive step to attend the needs of the new multipolar world that has emerged since the fall of the Soviet Union, mainly because it will compel the U.S. and Europe to update the present system and perhaps to work together for the sake of a more secure and efficient world economy.
The BRICS members are all developing fast-emerging economies. Their sixth summit was held in July 2013 in Brazil and hosted by Brazilian President Dilma Rousseff. The acronym BRICS was coined by economist Jim O’Neill in a 2001 Goldman Sachs paper entitled “Building Better Global Economic BRICS.”
The organization has come to represent a shift in global economic power away from the developed G7 economies (Canada, France, Germany, Italy, Japan, UK, US) towards the developing world. It symbolizes a counterbalance to the U.S.-Europe-led international geopolitical and financial system with its present laws and regulations.
In his opening remarks, UPF International OPSA director, Dr. Antonio Betancourt provided background—“Globalization is expediting and helping substantiate a multipolar world. After the Second World War, and especially since the fall of the Soviet Union, the U.S. together with Western Europe, asserted themselves as the predominant economic system that sets the rules of doing business for the international financial world affecting not only states but also global business transactions, commerce, etc. The reality is if a nation needs to act, or function within the present international financial system, it must do so by the rules and long-established procedures created by the U.S. and Western Europe.”
At the 6th summit in Brazil, the New Development Bank (formerly BRICS Development Bank), headquartered in Shanghai, was launched as an initial second choice for the developing world to the existing U.S.-dominated World Bank and International Monetary Fund.
At that summit, Dr. Nasser H. Saidi, former Chief Economist and Head of External Relations of Dubai International Financial Centre (DIFC), said, “The establishment of the BRICS bank marks the delayed shift of ‘soft power’ from the ‘West,’ from the U.S. and Europe to Asia and to emerging economies, confirming the shift in economic and financial weight.” He added, “China will have surpassed the U.S. by 2017 as the world’s largest economy, while India has already surpassed Japan to become the world’s third largest economy. ”Emerging markets already account for 48% of world trade.
The day before the OPSA forum, the Peterson Institute for International Economics in Washington, DC, hosted a “Breakfast Conversation” with the Hon. Jacob J. Lew, U.S. Secretary of the Treasury. According to Dr. Betancourt, who attended the program, Secretary Lew said the ethical values and procedures that created the international system have worked well since the inception creating a great amount of economic growth, stability and prosperity for the world economy. The BRICS countries will find it very difficult to create such a reliable system of trust. He also questioned how BRICS could avoid unhealthy competition, confusion, relaxation of well-accepted international standards in lending, payments, movement of capital, and even bringing chaos in the international financial system.
A senior scholar at the Peterson Institute of International Economics related to Dr. Betancourt that the international system cannot continue to function today by having just the U.S. and a few other players in Europe dictating the ruling regimes for the entire world. He said that 40% of the developing world’s population needs a voice in the geopolitical and financial affairs that affect them presently and towards the future. Dr. Betancourt believes it is likely that the developing world will support BRICS “since most of the developing world is looking to alternatives to what has become or morphed into a straitjacket created by the U.S. and Europe and forced on them so that now they feel suffocated and almost paralyzed.” He said, “the system worked very well when most of the developing world’s financial and political systems needed the paternalistic protection, know-how and guidance from the U.S. and the Western world, but today’s situation is quite different. Most developing countries particularly those with huge emerging economies have become ‘adult’ countries and want to have a say in the regimes and affairs that affect their political economic systems.”
Dr. Alexandre Mansourov, the forum moderator, guided the participants through a series of questions and stimulating discussion, beginning with the question: “What is BRICS?” Explaining the background that gave it birth, he said, “In 2001, an investment banker at Goldman Sachs looked at some statistics and recognized that four countries —China, Russia, India, and Brazil—appear to be in the same developmental phase and growing markets. They have so much in common they should be treated the same.” An investment fund for those four economies to assist emerged, but “there was no institution or organization to speak of —it was an idea concocted by some analyst’s mind!” Hence, the question thirteen years later: “Is it still an idea or has it become a real organization?”
Reviewing the statistics, according to the Economic Cooperation Organization (ECO), as of 2014, the five BRICS countries represent almost three billion people or 40% of the world’s population, with a combined nominal GDP of US$16.04 trillion (20% world GDP) and an estimated US$4 trillion in combined foreign reserves. In addition, all the BRICS countries are members of major international and multilateral institutions, such as the World Trade Organization, the UN, and the G-20. The participants agreed that BRICS is far beyond merely an idea and has become a substantial reality and force to be reckoned with. The “New Development Bank” has an initial pledge of funds in the amount of $200 billion U.S. dollars.
Dr. Mansourov pointed to the relationship between the initial meeting of the BRICS finance ministers who met for the first time in November 2008 in São Paulo and the global economic and financial crisis brought on by the collapse of Lehman Brothers and Merrill Lynch.
According to Ralph Winnie, Director of the Eurasian Business Coalition’s China Program, when the global markets collapsed in 2008, “China was in the process of revaluing their national currency as per their agreement with the West. They were concerned for the stability of their own country.”
“If the formation of BRICS was caused or prompted by this global financial crisis in 2008,” asked Dr. Mansourov, “now that the crisis is over, why is BRICS still here?”
Other possible reasons for its existence were discussed, including what he called, “rising global ambitions of regional emerging powers dissatisfied with the global financial architecture,” and its anti-Western position, which challenges the status quo. For example, last March the BRICS nations abstained from a vote at the U.N. General Assembly condemning Russia’s annexation of Crimea.
According to Creighton Jones, Director of Research and Policy Design, 21st Century Science and Technology, “The financial crisis may be worse than it was prior to 2008. Just look at the rate of how leveraged the big banks are.” The global economy is still in trouble. If there is another default, the highly leveraged U.S. banks will need another bailout to stay afloat. Jones referred to China’s shift to extending credit “not just in the form of finance credit, but credit to be used for the purchase of things such as high-speed rail which China has become the leader in export.” China recently announced it will invest more than $10 billion in the construction of a high-speed railway in Russia. Russia has a number of bilateral agreements with other BRICS nations for the development of nuclear power including South Africa and Argentina.
To the question, how important is BRICS for China, and given that importance, what is the future of BRICS from the Chinese perspective, Ralph Winnie said, “The Chinese have a strong desire to acquire natural resources. They just signed a major oil and gas deal with the Russians. The Russians have said it’s very advantageous to the Chinese. The BRICS is important for creating new markets for countries like Russia that are under sanctions. The Chinese recognize their government’s legitimacy, economic peace, and prosperity for the people and that working with countries beside the U.S. and Europe is going to be able to give them other options and alternatives. Setting up the establishment of the BRICS infrastructure and the bank is key. That is a true alternative and creates new opportunities for the BRICS countries to work together, engage in construction projects, and not be dependent on the West.”
Paraphrasing Treasury Secretary Lew, Dr. Betancourt said, “the system that was created 70 years ago has produced stability with an unprecedented degree of prosperity for the world’s economy based on values or on certain universal ethics that have worked very well.” The world was re-created in the aftermath of World War II, said Dr. Betancourt, and in those times of chaos, it was the responsibility of the U.S. and Europe to create an infrastructure and system of procedures for the world to operate. It has worked well—to an extent. However, countries like China, India, Russia, Brazil, Mexico, and others now “want to cut the apron strings.” Dr. Betancourt argues that the leaders and managers of BRICS have been “recipients, repositories and carriers of the best training, values, teachings and best practices from the Western world’s institutions and academia. The western values and ethics that produced the rules for the playing field in finance and economics have spread all over the world. They are not reinventing the wheel.”
Dr. Betancourt disagrees with the charge that BRICS is “anti-Western.” He said, “They’re just following procedures described according to their own views or interests that may not be necessarily in line with the interests of the U.S. or Western Europe.”
Dr. Mansourov posed the question —With so much at stake would China be willing to go down that road and to what extent do the Chinese share that anti-American sentiment?
Winnie said, “one of the criticisms of the Chinese was that they just come in and take the resources, they don’t want to give back to the community.” However more recently, “the Chinese are starting to get that message. They are taking a very practical approach in dealing with African countries and starting to create alliances.”
Jones referred to a discussion held this past August by the Brookings Africa Growth Initiative (AGI) which hosted Kenyan President Uhuru Kenyatta. Regarding financing, the Kenyans have expressed a certain gratitude to the Chinese for their lending policy which serves their mutual benefit vs. the conditional terms to borrow money for infrastructure projects from the IMF and the World Bank with their political agendas.
Mr. Salah Brahim, President & CEO, GMI-Grey Matter International Ltd., and former World Bank executive, believes that BRICS was formed in response to a perceived exclusion and a sense of not being appreciated by the established powers. As an Algerian, he is sensitive to the charges and feels BRICS is unfairly being “accused of doing exactly what they (the established powers) have been doing.”
Dr. Norman Kurland, President, Center for Economic and Social Justice, spoke about access to money and credit. He referenced Harold G. Moulton, President of the Brookings Institution in his 1935 book, Formation of Capital. Said Moulton, “Distribution is the trouble. The way our income is distributed provides inadequate purchasing power for our full production.” Dr. Kurland introduced the idea of the “Just Third Way” as a new paradigm, which transcends the power- and ownership-concentrating systems of traditional capitalism and traditional socialism.
Regarding Brazil, although it is geographically and geopolitically close to the United States, China is already Brazil’s most important trading partner. Brazil wants to understand China and her vision for the 21st century, particularly in how it deals with important challenges such as climate change and maritime security.
Dr. Betancourt, who was born in Colombia, shared some personal experiences as director of several international NGOs, including the Summit Council for World Peace and AULA, the Association for the Unity of Latin America. He believes Brazil has been kept at arms length by the U.S. from the time of the “industrial revolution all the way to 2014.” Brazil feels a certain connection to the BRICS nations because of their shared experience being “outside the U.S. sphere of influence.” Paraphrasing the senior scholar at the Peterson Institute of International Economics, “no matter how much restructuring the IMF proposes for the current financial crises, the solution will not come; the time of the West ruling the world and telling the world how to act is over.”
Mr. Elliot Wolff, President, Advantage Healthplan, Inc., offered that “there are considerations that bring these countries together in a way not only trade related.” He gave the example, “at the time the discussions were evolving for BRICS to come together, the Brazilians were hoping for the resolution of the Iranian nuclear development which was infuriating to the U.S., but it reflected the identity of the Brazilians. They were negotiating at the time for a permanent seat in the UN Security Council.” Another example concerned the proposal that Taiwan be expelled from the United Nations. “There are many countries now that have a closer relationship to China than before because they voted in favor of expelling and that is a very important consideration for foreign policy.” Russia and China have seats on the Security Council. “There is a national identity that suggests the largest country in South America is not being represented.”
“Even though it looks like the world is ruled by elitists from above,” said Dr. Betancourt, “you cannot forget ‘people's power.’ It was ‘people’s power’ that changed South Africa and India. India was not changed from the top leadership of the British Empire because they wanted to give Hindus their independence. In India, it was the work of 'people's power.’ People are growing, progressing and developing forward and upward on what UPF Founder Dr. Moon called the “merit of the age.”
In closing, Dr. Betancourt said, “As to the question is it good for the U.S. to remain a “hegemony” and for BRICS to destroy that ‘hegemon'? The answer is no, but if the U.S. can rekindle a “Second American Revolution” and restore its sense of “American exceptionalism,” be the true bridge to the world and “the light of the world,” then it is good. UPF welcomes BRICS. We are looking for new players in the multipolar world that will guide it towards a culture of peace and reconciliation, as envisioned by Dr. and Mrs. Moon with a final goal to help create a truly inclusive democratic world characterized by a society of interdependence, mutual prosperity and universally shared values."
ATTENDEES:
MODERATOR: Dr. Alexandre Mansourov, Visiting Scholar, U.S.-Korea Institute, SAIS, Johns Hopkins University
HOST: Dr. Antonio Betancourt, Director, Office of Peace and Security Affairs, UPF International-DC Office
PARTICIPANTS:
Mr. Salah Brahim, President & CEO, GMI-Grey Matter International Ltd.
Mr. Joseph Burns, Board of Directors, The Winchester-Underwood
Prof. Diane Falk, Research writer and editor
Mr. Creighton Jones, Director of Research and Policy Design, 21st Century Science and Technology
Mrs. Rechelle Jones, 21st Century Science and Technology
Ms. Yeeun Kim, Intern, U.S.-Korea Institute, SAIS, Johns Hopkins University
Dr. Norman Kurland, President, Center for Economic and Social Justice
Mr. William Reed, President, Black Press International
Mr. Ralph Winnie, Jr., Director, Global Business Development and the Eurasian Business Coalition’s China Program, Eurasia Center
Mr. Elliot Wolff, President, Advantage Healthplan, Inc.
Dr. Mark Barry, Advisor, UPF Office of Peace and Security Affairs (observer)
Dr. William Selig, Deputy Director, Office of Peace and Security Affairs, UPF International-DC Office
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