One response to “BRICS bank – New bottle. How’s the wine?”

  1. Nicole Claes

    Sameer Dossani admits, “Even in a best-case scenario, initiatives like the (new BRICS development bank) are likely to take a GDP-centred, Northern development-model approach” but adds “despite its many potential flaws, the proposal to establish the NDB should be viewed with cautious optimism.”

    Well, we certainly need some new initiative for industrial development.

    Global growth is slowing and well below the rate before the recession of 2008-09. Clearly, the US economy will be stuck in its current low growth trajectory, at best, unless businesses start to invest in new equipment, plant and technology.

    As Sameer points out, “The period from 1980-2010 was in part defined by extremely slow growth globally. Where growth did occur in the North, it often turned out to be the result of speculative bubbles. This was because of what companies argued were relatively low rates of profitability on new productive investment, especially compared to returns on financial speculation. This coupled with low rates of interest allows companies to stack up cash and take out more debt to finance share buybacks and financial asset purchases.”

    So the stock market is booming while investment is at a standstill.

    The cash that is stacked up is immense. I read recently that the top 2,000 capital investment spenders in 2013 have a staggering pot of US$ 4.5tn. Yes, four and a half trillion dollars! Yet global capital expenditure is likely to fall 0.5% in real terms in 2014, having fallen by 1% in 2013.

    Sameer also points out: “In the South, the only countries to grow were those that ignored Washington consensus policies – China, Malaysia, Singapore and a few others – and used state-backed borrowing and investment to drive an industrial policy.”

    The International Monetary Fund’s chief, Christine Lagarde, has hinted that the IMF is likely to reduce its forecast again for global economic growth for 2014 and 2015.

    Interestingly, Lagarde’s answer to improving growth was “more public investment”, which is ironic as most governments are cutting public investment in order to meet fiscal austerity targets.

    Now the IMF says that countries should boost growth by governments investing in infrastructure, education and health!