by Tahir Mustafa (News & Analysis, Crescent International Vol. 42, No. 3, Jumada' al-Akhirah, 1434)
The unipolar world so loudly proclaimed by the US after the demise of the Soviet Union is dead. A multipolar world has emerged, as witnessed at BRICS fifth summit in Durban, South Africa.
The notion of a unipolar world was never tenable. Even though the US had primacy for a short while after the demise of the Soviet Union, Washington’s hubris instigated by the Zionist-dominated neocon cabal hastened its demise sooner than many had anticipated. In any case, in a world with multiple centers of power, it was impossible to have maintained US dominance forever. The US has declined both militarily and, more importantly, economically, bringing with it diminution in its political clout.
Proof of this emerged during the March 26–27 summit of BRICS leaders in Durban, South Africa that produced a landmark decision with far reaching implications for global finance and politics. Leaders of Brazil, Russia, India, China and South Africa (BRICS) at their fifth summit unveiled the establishment of a new bank. Other agreements at the summit included the establishment of the BRICS Business Council, financing for a green economy and infrastructure in Africa, as well as the establishment of the BRICS Think-Tank Council. The group also agreed to set up its own rating agency, bypassing Moody’s/Standard and Poor’s with their politically driven agendas.
Despite its emphasis on trade, economics and finance, BRICS is beginning to take on distinct political overtones. The member states say the current global balance of power is unworkable, with institutions such as the World Bank, International Monetary Fund (IMF) and the United Nations Security Council having failed to address matters concerning global economics and political disputes. A week before the Durban summit, China’s new President Xi Jinping was in Moscow (March 22), his first visit after assuming his country’s top post. The chemistry between Xi and Russian President Vladimir Putin was excellent. Both leaders talked in grand terms. Putin outlined his vision for BRICS; he wants to steer it toward “a full-scale strategic cooperation mechanism that will allow us to look for solutions to key issues of global politics together.”
Russia and China have a similar outlook on Syria. They have worked together to prevent its being turned into another Libya, where the West used UN Security Council Resolution 1973, which imposed a “no-fly zone” over Libya, to conduct a turkey shoot against Colonel Muammar Qaddafi’s forces. Under the cover of the UN resolution, Qaddafi was overthrown and murdered. Russia and China will not allow a replay of this in Syria, hence their vetoing of three Security Council resolutions. Russia and China also do not agree with the West’s position on Iran’s peaceful nuclear program. At the Durban summit, BRICS called for a negotiated and diplomatic solution to the standoff. The group insisted it was the only way forward. Such a call clearly gave heartburn to the warmongers in Washington and Tel Aviv.
On the question of the new development bank, the leaders explained that their aim was to break the monopoly of Western financial institutions that have historically worked to undermine developing economies. “Not long ago we discussed the formation of a developmental bank… Today we are ready to launch it,” said South African President Jacob Zuma at the start of the summit. “We have decided to enter formal negotiations [not only] to establish a new BRICS development bank based on our own considerable infrastructure needs, which amount to around $4.5 trillion over the next 5 years, but also to cooperate with our emerging market in developing countries in the future,” said Zuma.
Together, BRICS members represent more than 40% of the global population and 25% of its GDP. This last figure is likely to increase as China and Brazil take major strides in economic development. The five countries also announced that they are mulling over a $100 billion Contingent Reserve Arrangement among BRICS members, asking their finance ministers and central bank governors to continue working toward its establishment. The arrangement will have a positive precautionary effect, guard the BRICS short-term liquidity pressures, and enhance financial stability, complementing existing international arrangements as an additional line of defense, said the Durban Declaration at the summit.
The BRICS bank will present an alternative to Western monopoly on finance. In any case, the Western financial and banking sectors are on the verge of collapse. The turmoil in Cyprus is but the latest manifestation of this phenomenon. In the US, Lehman Brothers, a financial services firm and fourth largest investment bank, was allowed to sink in 2008 but Goldman Sachs was saved, primarily because then US Treasury Secretary Henry “Hank” Paulson was former chief executive of Goldman Sachs. The rot however has spread to many Western financial institutions and it appears increasingly unlikely that they can hold the tide.
The function of the new BRICS bank will be to provide a collective foreign exchange reserve and funds for financing development projects in order to address the needs of emerging economies. During the summit, considerable progress was made. The two largest economies of the emerging power groups, China and Brazil, agreed to remove nearly half of their trade exchange out of the US dollar zone. This will add to pressure on the dollar, sinking it further. The US dollar has already lost much of its clout. Currently 53% of the world’s central banks hold their reserves in US dollars. This is down from 64% a decade ago. Financial experts believe that once the dollar reserves fall below 50%, it would signal the end of the US dollar as a global reserve currency.
At the Durban summit, it was also agreed that each of the five BRICS members would contribute up to $10 billion to launch the development bank with a total start up capital of $50 billion. For the first time, no Western capital would be involved. While the bank will take several years to become fully operational, the BRICS decision signals a serious move in creating an alternate mechanism to the current global financial system. The bank will operate using national currencies, rather than a single currency such as the dollar or the currency of any of its member states and will be used in bilateral and multilateral trade deals. This appears to be a major concession by China whose currency, the yuan, is clearly the dominant currency among BRICS members and will soon become a major global currency as well. China’s GDP is expected to surpass that of the US by 2017, according to the IMF, making it the world’s largest economy in the world. Concurrently therefore, the aggregate BRICS’ GDP of 25% (of global GDP) is expected to increase in coming years as the US and European economies decline while the emerging BRICS countries take center stage.
Chinese President Xi expressed great optimism about BRICS’ potential. “Slower economic growth doesn’t imply a downhill path for BRICS. On the contrary, the development potential is very promising,” the China Daily quoted Xi as saying on March 28. It is only five years since BRICS was established and it is still in the development stage. Members should focus on boosting ties. Improving the standard of living for 3 billion people will create massive opportunities, Xi said, and he called for major cooperation projects. “The potential of BRICS cooperation has not yet been fully explored,” Xi said. Trade volume among the five countries only accounts for less than 1% of the global volume, he added, suggesting it should be increased substantially.
Xi also emphasized closer cooperation between BRICS and Africa. China has a large number of investment projects in Africa and has invested heavily in mining and infrastructure development on the continent. “The BRICS and Africa should be closely integrated and promote Africa as the new highlight in the global economy,” Xi said. He also called for regular meetings among BRICS leaders, and urged them to listen to the BRICS Business Council, which was established during the two-day summit and will be a principal mechanism for dialogue among member countries. The council will have five representatives, one from each member country who will all be equal and will operate without a fixed leadership structure. This breaks from the pattern established at the World Bank and IMF; the former is always headed by an American while the latter by a European.
Cao Heping, professor of economics at Peking University, said the group has the potential to reach even bigger agreements. “Economic cooperation among BRICS countries shouldn’t stop at establishing a common development bank, but should push on for a Free Trade Agreement,” he said. Another likely scenario is that a number of other countries, Indonesia, Iran and Turkey may soon join BRICS. Its new abbreviation may become a tongue twister (BRIIISCT?) but there is little doubt that an expanded BRICS will assume greater economic and political clout. The global landscape and how affairs are conducted on the world stage will undergo radical change.
Welcome to the new multipolar world order. It could hardly do any worse than the unipolar world order that gave the world two destructive wars and endless suffering because of America’s addiction to perpetual conflict.