New powers ready for the ‘Rio consensus’ era

From  IOL Business report
By Kevin Gallagher
July 14, 2014


Conveniently scheduled at the end of the World Cup, Brazil hosts the leaders of fellow Brics members Russia, India, China and South Africa in a meeting that presents them with a truly historic opportunity. While in Brazil, the five countries hope to establish a new development bank and reserve currency pool arrangement.

This action could hit a trifecta: recharge global economic governance and the prospects for development as well as put pressure on the World Bank and the International Monetary Fund (IMF) to get back on the right track.

The Bretton Woods institutions, headquartered in Washington, originally put financial stability, employment and development as their core missions, with good reason. That focus, however, was derailed in the last quarter of the 20th century.

During the 1980s and 1990s, the World Bank and the IMF pushed the Washington Consensus, which offered countries financing conditional on a doctrine of deregulation.

With the benefit of hindsight, the era of the Washington Consensus is seen as a painful one. It inflicted significant economic and political costs across the developing the world.

What is more, the operations of the World Bank and the IMF are perceived as rigged against emerging market and developing countries. The unwritten rule that the head of the IMF is always a European and the World Bank chief is to be an American is a superficial but no less grating public expression of that.

Worse is the fact that the voting structure of both institutions is skewed towards industrialised countries, and grants the US veto power.

It was not always that way…

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