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6 June 2011, Gateway House

BRICS: Convergence or dissonance?

As Europe stands united in its support for France's Finance Minister Christine Lagarde as a candidate to head the International Monetary Fund, many have begun to question if BRICS is truly an effective and united bloc. Will they be able to put forth a candidate all emerging countries can support?

Director, Gateway House

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The crude cavorting of former Managing Director of the IMF has set off numerous debates in different parts of the world, including those of global power equations and whether the victors of the Second World War have a birthright to continue to dominate the infrastructure of the world in the 21st Century.

The two most important and most interesting to us relate to gender equality and the BRICS countries. The Indian media has gone to town with the failure of developing countries to quickly agree on a candidate as the developed countries have with French foreign minister, Christine Lagarde – who arrives in India today, following a visit to Brazil, to get support for her candidature from the BRICS economies.

The question being asked with impatience, if not disgust, is whether at all BRICS members have what it takes to have a place at the global high table. All supranational groups, including the EU but especially the BRICS, have trouble acting collectively.  The race for the IMF position has highlighted these challenges, as well as the differing levels of cohesion between the long-united developed world and the developing world.

It is certainly true that the West united behind Lagarde rapidly. She staked a claim to the post on the morning of 25th May, as soon as the disgraced Mr Strauss Kahn announced his resignation from a jail in New York. Fortuitiously the G8 met in Deauville, France, under the leadership of President Sarkozy the same afternoon so it could consider the issue immediately. After the meeting, the foreign Minister of France announced that the G8 were in agreement in support of the candidature of Lagarde. In actual fact the United States, without whose 16.5% of the 45.1%of the G7 vote a European cannot be elected, has reserved its position till June 10th by when all the contenders must announce themselves.  Japan has since contradicted the French claim by stating that the IMF was not discussed at all at Deauville.  And ofcourse, Russia is a party to the joint statement issued by BRICS which objected to the convention of always having a European head the IMF and called for the most qualified candidate regardless of origin.

The developing nations were slower. In that camp, the head of the Mexican Central Bank, Agustin Carstens, announced his wish to head the world body. Apparently he is opposed by Brazil, possibly because its own Finance Minister could be a candidate. Other names such as Trevor Manuel, the highly respected former Finance Minister of South Africa, and candidates from Singapore, Thailand and Indonesia are being speculated.  In India there was some grumbling that the vice-chairman of the Planning Commisssion and former IMF official Montek Singh Ahluwalia would be a good choice. Typical of our geriatric leadership, it took some days to discover that he had already passed the IMF retirement age of 65.

In criticizing developing countries, especially BRICS, we in India have overlooked some of the vested interests of the West. Even though stagnating, Europe has a greater interest than anyone else to hold on to what it has, because of its increasing irrelevance in the global order and therefore moved rapidly. But the consensus is hardly ever unanimous.  In this instance the UK’s Chancellor of the Exchequer let it be known that UK would support Lagarde even before she announced her candidature. Why? Because everyone understood that under no circumstances would the current Cameron government support the ambition of former Prime Minister Gordon Brown to head the IMF. This interplay of personal rivalry overtook another possible European consensus.

Given the circumstances of Strauss Kahn’s departure over allegations of sexual harassment, Christine Lagarde has made a virtue of her gender. However it remains unclear why Lagarde is assumed to be a good candidate even though she has no economics in her background – a requirement that would make or break a candidate from a developing country. Having been the chief executive of a U.S. law firm, she speaks near-flawless English; so it is hoped that she will be acceptable to the US. But if so, it will be for more hard-headed reasons than her accent.  European support will be needed if the US hopes to hold on to its own, always-assumed No. 2 position in the IMF and its No. 1 position in the World Bank when that becomes available again in a couple of years.

Is BRICS a united and effective grouping? Sure, as a group it is ambitious and ‘emerging’ strongly. The issue is not whether BRICS has what it takes to sit a high table but whether its economic weight in the global economy and its contribution to averting a breakdown following the U.S.-generated global financial crisis, merits its presence on that and other tables. After all, the logic of G-20 flowed out of the fact that the Indian economy, leave alone the Chinese, is larger than that of the U.K. and France.

There are many divisions within the BRICS. Despite the apparent equality of each nation within the alliance, the dominance of China creates serious dissonance.  China is not only the largest economy, it is also the largest trading partner of all the others. This is analogous to the position of India within SAARC. While Russia resents its dependence on China for selling energy, it also fears the creeping occupation of its resource-rich, vast and under-populated Eastern regions. Both Brazil and India resent their emergence as suppliers of raw materials to China even as they try to promote bilateral trade. China and India have major political problems including contested borders and the Pakistan-China collaboration in nuclear and missile technologies. South Africa, like other African countries, welcomes Chinese investment in infrastructure but resents its cornering of energy and minerals, and the negative impact of the flood of cheap Chinese consumer products. There is also a growing sentiment that China uses BRICS to cover its currency manipulation in the face of Western, especially U.S. criticism.

Stories are already floating around that although China is party to the Joint Statement of BRICS criticizing ‘nationality’ as a basis for selection and calling for representation of emerging economies in the top echelons of the IMF, China has actually done a deal in which it will support the European candidate in return for another top position for one of its officials at the IMF. This is no surprise considering that a whole series of maneuvers are underway by the beneficiaries of the current financial architecture to divide the developing countries. After all, for China, membership of the G20 and BRICS is only the consolation prize after its hopes of a condominium with the United States, a G2, in the early days of the Obama Presidency, failed to materialize.

Compared to the four years of the existence of BRICS, the European Union has been around for over 60 years. In those decades it has set up a powerful Secretariat, a European parliament, and drawn closer in numerous ways, most prominently with a common currency, the Euro, and a common space through visa-free movement in the Schengen region. However despite NATO membership, common to the significant Europeans like Germany and France, it has failed to present a common face on innumerable foreign policy issues globally. Perhaps the competing colonial practices of each of the major countries have been the obstacle.  The failure of Norway to join the EU, the failure of the UK and Denmark to join the Euro and the ambivalence of the UK to wholeheartedly be part of the EU, the current quarrel between France and Italy over Arab refugee movements in the Schengen area are an index of how difficult it is to shed national identities and not pursue national interests single mindedly.

It is undeniable that BRICS has a lot of work and years ahead before it can be an effective bloc on all issues. While ambitious and unlike the EU which has near-100% geographical contiguity, the member countries have a vastly diffe
rent history. With all its political differences, it may well evolve into a more coherent economic grouping before its political interests converge enough to take unified positions globally. In that, it would not be so different from the still-squabbling Europeans.

Neelam Deo is Co-founder and Director, Gateway House: Indian Council on Global Relations; She has been the Indian Ambassador to Denmark and Ivory Coast; and former Consul General in New York.

This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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