Parallel Institutions as a Challenge to the Liberal Order

By Thomas Kleine-Brockhoff

One of the dangers on the road to a polycentric world is the emergence of parallel institutions of global governance. The planned BRICS Development Bank is the most prominent example. The problem is: a development bank of this kind already exists. It is called the World Bank. The expressed purpose of a BRICS’ alternative lender is to be an alternative lender. It couldn’t be more “in your face”.

Originally, the term BRIC was proposed by then-Goldman Sachs Chief economist Jim O’Neill in 2001 to describe the main common characteristic of Brazil, Russia, India, and China: high growth rates. Expanded by an “S” for South Africa, an analytical concept turned into a political reality: since 2009 the BRICS leaders convene regular summits. There is nothing wrong with these meetings because they allow strategic rivals like Russia and China or China and India to operate in a cooperative environment.

But as opposed to the G-7 and G-8, these summits are not mere prep meetings for the G-20; and, over time, they have added their own infrastructure. A number of think tanks like Rio de Janeiro’s BRICS Policy Center have been founded. They build scholarly networks throughout the BRICS world, analyze the meetings and help to set their agenda. They get together during parallel “think tank summits” and thus they form the institutional underbelly of an otherwise odd combination of countries.

Some aid-weary Western policymakers have seen a development bank led and entirely funded by emerging economies as a dream come true and as a sign of growing stakeholdership of the BRICS. But they misread the founders’ intentions and underestimate the implications. At a minimum the new bank will undermine the rules and norms for development that the OECD has nurtured over decades — because all of the BRICS have different standards of what constitutes aid. More realistically, what so far has been a soft institutionalization will turn into a systemic challenge to the liberal world order. The idea of globally accepted institutions will evaporate if their monopoly is challenged.

British analyst Martin Wolf has noted that “there’s no reason whatsoever to expect [the BRICS] to agree on anything substantive in the world, except that the existing dominating powers should cede some of their influence and power.” It is true: the BRICS do not agree on climate policy, trade policy, UN Security Council reform, global rebalancing, or much else.

However, as Mark Leonard observes, “post-colonial superpowers” like Brazil and India see globalization as a process that is “creating sovereignty on a scale seen never before.” A logical consequence is to want to sit at the table of power or, alternatively, to build their own table of power. That these countries do not agree on the specifics may be a temporary phenomenon.

Nothing suggests so far that the BRICS have alternative ideas about order. They don’t even seem to look for them. Some of them, China in particular but also increasingly India, have chosen to join some existing sets of international norms. But what they all crave and grow impatient about is shared leadership. The Western powers better learn fast how to do that.

Thomas Kleine-Brockhoff is Senior Director for Strategy and Director of the Eurofutures Project at the German Marshall Fund of the United States.

By dtwining Posted in GT2030

6 comments on “Parallel Institutions as a Challenge to the Liberal Order

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  3. Great post – two comments:
    1) I think your warning call for existing international organizations is spot on, and the G-20 summit really bore these comments out. The BRIC countries both contributed an additional $75 billion to the IMF coffers, but also agreed to build a financial safety net similar to the Chiang Mai initiative. This waiting game of moving both multilaterally and regionally at the same time is sure to continue.

    2) This is a fixable problem – the reason why the BRICS are building these regional networks is that progress on quota reform at the IMF has been so slow. Countries need to honor their pledges to approve the quota reforms proposed in 2010.

    • Dear Basab, you may not know me, but there are a few things coommn between us. The same undergrad school, Infosys and 14 year old son. I read your posts regarding your son accidently and immediately felt like writing to you. My son also has a chronic condition and can empathize the battles you and your wife must have fought against the school system, not to talk about the umpteen trips to doctor’s office and paying those medical bills. The good news is that autism does give you benefits over the “coommn” gene pool. Otherwise, how can you explain the brilliant composition your son made? I could never think that an 8th grader could do a mozart. Somewhere inside us, we feel why us? Why couldn’t he be “normal”? But, why should we expect everyone to fall in line? It is their uniqueness which creates this mosaic. Otherwise life would be so drab. May your son shine the world with his brilliance. I have never met him, but can feel the vibes from his piano composition. And yes, please don’t ever make him fall in line. He does not need to “become” anything. He is great as he is.

    • South Africa is certainly a deilnopveg economy with enormous potential. It’s a lot smaller than the BRICs, with GDP about a quarter of that of Russia, the smallest BRIC economy. But it’s part of the next group of economies that have the potential to grow substantially faster than the rich economies, including Mexico and Indonesia. South Africa is more important than its size suggests because it is so critical to the whole southern African region. Without a prosperous and stable South Africa, the prospects for that region are poor. But the political situation in South Africa, combined with the great inequality (the two are of course linked) makes the future more uncertain there than in the other economies I’ve mentioned. Having worked in Lesotho for two years I wish the whole area the very best of luck.

      • Trevor-I agree with you. Instead of worrying about what mgesase buying American made products would send to the international community about the US commitment to trade negotiations, we should be more concerned about the mgesase we send when we value cheap prices over human rights.

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