Rising South: An order rebalanced

The Big Lens

US President Donald Trump has, in his inimitable style, once again taken to social media to issue a threat to the BRICS countries huddled together to devise strategies against the US tariff attacks. “Any country aligning with the anti-American policies of BRICS will be charged an ADDITIONAL 10 per cent tariff,” he said, hours after the BRICS finance ministers issued a statement that criticised the tariffs, calling them a threat to the global economy.

Speaking virtually to the BRICS gathering, Russian President Putin reiterated his suggestion of greater financial independence from the US dollar in international trade settlements. Trump is understandably annoyed at the revival of this narrative of de-dollarisation.

Besides criticising Trump’s use of tariffs as a coercive policy to force countries to enter bilateral trade deals that favour the US, the BRICS summit proposed a series of reforms in the International Monetary Fund (IMF) and its currency valuation methods. According to the BRICS economic advocacy group, in the current economic uncertainty, the IMF needs to embrace urgent reforms in the quota system to increase the representation and voting power of developing countries, as the present system promotes dominance of advanced economies. The BRICS nations are also calling for an end to the “gentlemen’s agreement” which has historically favoured European countries in the IMF’s leadership positions.

Global financial institutions, especially the two Bretton Woods institutions – the IMF and the World Bank (WB) – did play a significant role in the international financial architecture for some years. But they could not prevent the financial crisis nor bail the developed economies out of the crisis, much of which was their own creation. It has also been noted that their working and decision-making process continued to be greatly influenced by the developed “North” and less relevant to the developing or underdeveloped “South”. The last two or three decades have seen the global growth engine shift from the North to the South, which now houses three of the world’s largest economies. Meanwhile, groupings such as BIMSTEC, BRICS, ASEAN, and SCO have added tremendous muscle to the emerging South-South cooperation.

BRICS countries add up to represent about 49% of the world’s population, 39% of the global GDP, and 23% of international trade. In a changing geopolitical and geo-economic setting, when the US under Trump’s administration is looking to withdraw from global institutions and looking more inwards in its quest for Making America Great Again (MAGA), the post-World War II economic institutions cannot expect to be relevant and succeed in their original objectives by remaining within a seven decades-old organisational structure. They must either reinvent themselves or face the possibility of paling into insignificance.

The BRICS financial institutions and efforts under the South-South Cooperation (SSC) are assured signs of a collective leadership that is aligned with a multilateral world order – these are realities of the present era. The rise of the South, the emerging economies, and India’s leadership role in SSC promise an alternative to archaic perceptions that are far removed from ground realities, and to the North and its tired leadership. Blocking the progress of BRICS will serve no real purpose for America or the West.

Trump’s attempts to create roadblocks for BRICS are born out of apprehensions of a challenge to the America-led world order, which is creaking under its own weight of contradictions. The independent non-dollar trade settlement system, which the BRICS is considering, may not be a reality soon, but it is born out of necessity, from the dollar’s failure to meet the challenges and needs of the present era. The bilateral and multilateral economic, security, and strategic arrangements under the BRICS agenda need not necessarily hurt the interests of the US or any other grouping unless there is an established clash of interests, which in a highly globalised world would be detrimental for everyone involved.

Perceptions play an important role in understanding the geopolitical and geo-economic dynamics of any given time. The decisions, economic or otherwise, the interpretations of meetings and events, and policy formulations made on flawed perceptions will lead to detrimental results. America and the rest of the Western world have to learn from past errors of judgement and look at the emerging institutions of the South, such as BRICS, from a new perspective. The shift is real – looking away cannot alter that reality.