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Mainstream, Vol XLVI, No 50

Rise of BRIC, and the US’ Desperate Move to Retain its Stranglehold

Wednesday 3 December 2008, by Benjamin Todd

In the Wake of Global Economic Crisis

Despite being responsible for the current global economic crisis, the United States is now trying to place the greater part of the burden on the developing countries to maintain the world’s financial stability. Washington is trying to impose on these countries the forms of their participation in the international financial institutions so as to continue to limit their potential to influence the process while widening the US ability of the US to use other countries’ gold and currency reserves.

According to international experts, it is necess-ary to not only transform the world economy to overcome the current financial crisis, but also to prevent recurrence of similar situations in future. According to the Merrill Lynch’s Governing Director Alex Patelis, who heads the World Economy Department, the financial crisis points to the need to create a new financial world order; he has emphasised that the current world financial system, established in 1944, does not meet the present-day requirements. The emerging markets, the members of BRIC (Brazil-Russia-India-China) in particular, have increased their influence over the years and are, in fact, the creditors of the developed world. The international community needs a much more stable and transparent system to control and regulate the activities of the biggest multinational corporations.

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Experts in the Financial Times are of the view that in spite of the financial crisis and the stunted growth of the American economy, the world economy is still dramatically growing, courtesy the BRIC countries. Significant developments in terms of the economic strides of India, China and Brazil were taken note of and these states invited to some meetings of the G-8 five years ago when the Goldman Sachs specialists announced that the process of formulating the global economic policy should be radically transformed to meet the current and future needs of the world economy. However, these countries are getting involved into the control of the world financial process at a very slow pace. Taking into consideration the further dynamic growth of the BRIC countries, their leaders should be more vocal in advocating adjustments in the world economy’s management at an accelerated pace so as to ensure their involvement and participation in the entire process.

The Brazilian Minister of Foreign Affairs, Celso Amorim, has urged the BRIC countries to coordinate their efforts for overcoming the global financial crisis. The head of Brazil’s diplomatic apparatus has also opined that after the crisis the world was bound to face the problem of building a new financial system and the developing countries would play a more active role in it than what they have done in the past. Experts forecast a downgrading of the West’s status alongside the rise of the East—by 2030, the BRIC countries will be serious players on the world scene and the centre of globalisation can move to the East.

Specialists in UNCTAD and some other inter-national organisations note that in spite of the increasing urgency of initiating measures to modernise the current international financial system, the inoperative World Bank and Inter-national Monetary Fund (IMF) are not prepared to drastically improve their rules of business so as to meet the requirements of the prevailing challenges in world finances. The United States is afraid of losing its decisive vote in these organisations in a reformed Brelton-Woods system. That is why the Americans want to enhance the World Bank and IMF’s efficacy such as not to undermine the US’ position as the world financial regulator that almost unilaterally dictates the rules of the fund markets.

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