Brics will promote state-led development at Durban summit
by Dr Martyn Davies, FT Blog
March 25th 2013
After the onset of the (western) financial crisis of 2008, there has been a deep questioning of the free market ideology encapsulated by the phrase “Washington Consensus.”
At least this is the case in Africa. For a while there was debate over whether an emerging “Beijing Consensus” would gain traction and become the developmental compass for the developing world – a model that was “statist” in its approach and inherently distrusting of markets.
The Beijing Consensus – a synonym for China’s growth model – may be something of a mirage for Africa considering the very different set of developmental circumstances of most African states.
But that will not stop people from trying to adapt it. Under president Jacob Zuma, South Africa’s ANC government often describes itself as a “developmental state” – one that places the state as the driving force of growth.
This is the backdrop to the Brics summit taking place in Durban this week. What began as a loose grouping of populous emerging economies is rapidly morphing into a more coherent power grouping that reflects the shifting balance of power in the global economy – away from the traditional world to the new. This is the post-crisis new economic world order and the Brics represent this new reality.
After its inclusion into the group in December 2010 following the invitation by Beijing, South Africa has probably become its most enthusiastic member. If the Brics represents the first-tier of developing economies in the new post-Western dominant world order, then Pretoria’s joining of the Brics is to be regarded as the Zuma Administration’s greatest foreign policy success.
The major outcome of the Durban Summit will be the announcement of the Brics Development Bank (BDB). Originally proposed at last year’s New Delhi summit, the new organisation is likely to be used for increased state-driven infrastructure spend around key regional corridors in Africa.
This suits perfectly the South African government which seeks to draw its Brics partners into its foreign policy for the region. In the same way as China and Brazil’s development banks have served as tools of foreign commercial policy, so will South Africa’s, albeit with a regional focus. Will it be a potential game changer in developmental finance in Africa’s economies? It’s too early to say this, but the new institution will undoubtedly be giving the World Bank something to think about.
It is a pity however, that the Brics will not be discussing intra-Brics and broader trade liberalisation. This would undoubtedly give the stalled Doha Round some impetus in the face of protectionism from Western economies.
As cooperation between the Brics become more increasingly institutionalised, it will begin to challenge the economic architecture set out by the Bretton Woods institutions. Regarded by many policy-makers within the Brics as obsolete and biased towards the developed world, the underlying motivation within the Brics is to assert their own collective interests, hard though they are to define, and so do so against established Western ones. We will hear in Durban the need for a restructuring of the global economic architecture, one that takes into greater cognizance the needs of the developing world.This is the “Brics Consensus” that is emerging–a wide interpretation of what constitutes the interests of the developing world but one that is inherently opposed to Western inputs on its design.
What will be most apparent in Durban is that developing countries no longer look to the West for developmental guidance, but rather seek to formulate their own state-driven formulas for growth. The Brics Consensus will play a bigger role than the Washington Consensus.
Dr Martyn Davies is CEO of Frontier Advisory and a Young Global Leader of the World Economic Forum.