Updated: Jan 18
Earlier on the blog, I outlined the many Price-based motivations for Western development aid. Rich countries give development aid to poor countries in order to open up new markets, fuel domestic economic growth, and gain allies for their international political agendas. It is no surprise, then, that these aid programs have failed to eradicate poverty and instead encourage dependency and corruption in developing countries.
However, a new proposal from the BRICS countries (Brazil, Russia, India, China, and South Africa) poses a challenge to Western development efforts. After their fifth summit in March, the BRICS group announced the establishment of a new development bank that will rival the World Bank and the International Monetary Fund. The countries hope that new partnerships among developing countries will ensure steady economic development and liberate them from the dominance of the West.
The BRICS group is a collection of five developing countries with fast-growing economies and substantial political power in their respective regions. The original BRIC group began meeting in 2006, and South Africa was invited to join the group in 2010. The group has met once a year to discuss common goals and interests, and the bank will be the group’s first major institutional development. Under the Systems of Exchange typology, the bank could be classified as an Associative arrangement; by creating alternatives to Western development institutions, the BRICS countries hope to bolster their own economic growth and give poorer countries more control over their paths to development.
The public reaction to the BRICS proposal has been mixed. Many seem doubtful that the countries have enough in common to effectively challenge Western institutions. The countries operate under governance systems, and several of them are fiercely competitive in the global economy. The U.N. Conference on Trade and Development just released a report which found that BRICS countries rarely invest in each other -- just 2.5% of their foreign investment goes to other BRICS countries, and most of it goes to developed countries and regional allies. Given that these countries haven’t supported each other’s economic growth, many development experts are skeptical that they will begin to do so in the future.
Despite these concerns, many are glad to see new South-South partnerships and hope that they become a sustainable alternative to Western development efforts. If poor countries can establish mutually beneficial Associative arrangements rather than passively accept the terms of Western Price-based aid programs, their chances of reducing poverty and establishing economic independence may increase.
For more information about the proposed development bank and its potential impacts on developing countries, check out this video from Al Jazeera: http://www.aljazeera.com/programmes/south2north/2013/03/2013329144320843946.html.
Image by GovernmentZA.
Fifth BRICS Summit. (2013). (http://www.brics5.co.za)
Biggart, Nicole Woolsey and Rick Delbridge. (2004). “Systems of Exchange.” Academy of Management Review 29(1): pp. 28-49.
Polgreen, Lydia. (2013). “Group of Emerging Nations Plans to Form Development Bank.” The New York Times. March 26. (http://www.nytimes.com/2013/03/27/world/africa/brics-to-form-development-bank.html)
“Latest Global Investment Trends Monitor focuses on BRICS FDI and Africa.” (2013). United Nations Conference on Trade and Development. (http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=436&Sitemap_x0020_Taxonomy=Investment%20and%20Enterprise;#20;#UNCTAD%20Home)