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15 Sep, 2009 05:36

BRIC to call the shots in post-crisis world

The past year of economic decline has seen Washington’s influence on the wane, as well as London’s, and the way is now open for other countries to decide policy. Among them: Russia and her BRIC colleagues.

It has been a year since pictures of the collapse of US investment bank Lehman Brothers were beamed around the world – unprecedented images of bankers, the so-called Masters of the Universe, leaving Wall Street offices with their possessions in cardboard boxes.

To many of us, the financial crisis has meant job losses and home repossessions, but to economists, it is changed the fabric of our society, and accelerated a long-awaited move towards a multi-polar world.

A global society that no longer marches to the beat of America’s drum isn’t here just yet – but the direction is clear. The world, more and more, is turning towards new leaders and new currencies for solutions.

Doctor Paola Subacchi, research director of International Economics, Chatham House, thinks the economic crisis can be viewed as a catalyst for change.

“Countries which were growing fast, their economies were expanding, they were gaining more visibility in international relations terms – I’m thinking of the BRIC,” she says.

The platform for that movement was last April’s G20 summit in London. Created in the late nineties, the G20 was a response to the financial crises of that era. Its goal was to include key emerging market countries in global economic decision making, and they have met three times already.

“The upgrade of the G20 from a finance ministers’ meeting to a head of state meeting is very important. And it’s very important now to see around the table many more countries representing a large majority, almost the totality of global GDP,” Subacchi adds.

With their new, louder voice, the BRIC countries – Brazil, Russia, India and China – are calling for a move away from the dollar as the major global reserve currency. Throughout the last decade, an average of two thirds of the world’s foreign exchange reserves has been held in dollars.

“Countries like Russia and China and Brazil are trying to divorce themselves from the US, because it’s a completely toxic currency that’s just right for fraud. It supports an empire that’s just too lazy to compete,” financial analyst Max Keiser says.

Having a variety of reserve currencies wouldn’t just have economic significance. Geopolitically, if countries held reserves in roubles or yuan, Russia and China would gain weight in the international arena, and be more able to direct policy.

Chris Higson, a Professor at London Business School, believes the world would be a better place “if we simply don’t rely on one possibly unreliable superpower exercising its authority.”

Earlier this month, the UN backed the creation of an artificial currency for foreign exchange reserves. It is the first time a major multinational institution has come up with such a suggestion.