HAVE IMF AND WB REACHED THEIR PEAK?

After World War II the world experienced economic change resulting from what came to be known as Marshal Plan thanks to its initiator Secretary of State George Catlett Marshall, Jr. (December 31, 1880 – October 16, 1959). Under Marshal Plan, America loaned Europe $ 13 bn to rebuild its economy that's destroyed by the war. Ever since, the world's nary turned back as far as economic survival is concerned.  He who pays the piper calls the tune. Those providing financial lifeline have become what one can call neo-colonialists. As it was Marshal Plan for Europe, the World Bank (WB) and International Monetary Fund (IMF) otherwise known as Bretton Woods Institutions, are the creatures of one person, John Maynard Keynes (5 June 1883 – 21 April 1946), which instead of helping the world to recover from economic doldrums; they cause mayhem to some poor countries. These two bodies, for long, have dictated almost every aspect of poor countries’ economies. Their stingy and tormenting policies left many poor countries suffering without having anywhere else to go. The difference between Marshal Plan and IMF and WB is that there were few strings attached to the loan that Europe received as opposed to many that poor countries have received.

Recently, there's born new international initiatives whose vision is likely to change the economic landscape of the world. This is none other than BRICS which is an ellipsis for Brazil Russia, India, China and South Africa. According to BRICS just ended conference, it decided to form its own Financial Institutions that’ll help member countries and other countries to get financial support whenever their economies face a slump. For the first time, Africa’s among the movers and shakers in this new kid on the block thanks to the presence of South Africa. If anything, something’s to be said. This move’s likely to help poor countries as it threatens the existence of IMF and WB whose strength’s always depended on exploiting poor countries to which they give loans with high interest rates not to mentions superimposed policies.

So, to do away from IMF and WB taking advantage of others, BRICS decided to form its own Development Bank with the capital of $50 bn plus Currency Pool with the same amount as its capital. Every member country'll contribute $ 10 bn and the Bank’s headquarters will be in Shanghai China.  The Currency poor aims at helping countries forestall short-term liquidity pressures.

Russia’s Foreign Minister said that BRICS members, while speaking against unilateral actions in the world economy and politics, are not seeking confrontation but propose working out collective approaches toward the resolution of any problems.

Many still wonder even doubt if BRICS will succeed in awkwarding longtime western Financial Institutions that, for many poor countries, have become another scalawag. Chances of success are obvious given that currently, BRICS countries have fast growing economies compared to western countries.

When she's asked if BRICS Development Bank aims at countering IMF and WB, Brazil’s president Dilma Rousseff had this to say, “It is a sign of the times, which demand reform of the IMF.” On his side Russia’s president, Vladimir Putin, hailed the Bank saying, it was “a very powerful way to prevent new economic difficulties.” Power indeed so much that it is going to scale down the power of Breton Woods Institutions. Putin got another source of influence after being kicked out of G8 due to his involvement in Ukraine crisis.

Also, the policy they've embarked on is likely to help them to get a lot of countries supporting this project. Hence, make it successful. So too, BRICS will learn from the mistake of the west especially financial liberalism that enabled some companies in the US to offer money to mortgage knowingly that those receiving the money were unable to pay thus causing credit crunch.

Shall BRICS meet its obligations and plans chances or ushering the end of IMF and WB are so high that the world may experience a new economic order just soon. This being the case, BRICS needs to avoid repeating the mistakes that the west made to find itself in this situation. Again, nothing’s for good. Time for capitalistic institutions even pillars to be phased out is coming. What BRICS needs to avoid for all costs is war. History shows that Europe, especially, Britain and Germany, lost the baton after being engaged in wars. So too, the US soon will lose its superpower crown due to being engaged in wars in Afghanistan and Iraq. Therefore, the creation of BRICS Development Bank and Currency Pool is just the beginning of many things in the pipeline.

In sum, given that BRICS Development Banks stands to help poor countries out of the tentacles of Bretton Woods Institutions, poor countries need to make use of this opportunity. Again, have IMF and WB reached their climax? Time soon will tell.

Source: Business Times July 28, 2014.