'BRICS on the rise, but the dollar isn’t going anywhere’
RT: The BRICS nations argue that the current
global economic order should be changed because it is out of date
or perhaps out of balance. What do you make of that?
Charles Robertson: To be totally fair, the architecture of international finance was set up in the 1940s to reflect the reality then, which was obviously American power, the UK’s power and Europe in general. So, there are changes happening to the IMF (International Monetary Fund) and World Bank, but still, the head of these organizations is an American and there’s a European even though there’s been a strong challenge. I think the BRICS are saying they can’t be bothered to wait any longer for the IMF and World Bank to change more dramatically. They’re going to start making changes on their own.
RT:Do you think members of BRICS nations can work to effectively counter the dominance of the US dollar and the euro?
CR: There are two aspects here. As a trading currency, it makes a lot of sense to have one single point of exchange – a currency of exchange that everyone uses. It makes life simple. So I think as a unit of exchange the dollar’s going to be dominant for a long time. It took decades for the US dollar to take over from the British pound and it’s going to take decades for the US dollar to lose its dominance in trade. But in terms of saving money in foreign exchange reserves, it makes an awful lot of sense not to use the dollar as your only store of value. I think there’s a lot to be argued in favor of buying into local currency debt in Russia, Brazil, China. These are currencies which may well hold their value better.
RT:So you’re talking about the diversification ultimately of investing in various currencies, not just the greenback. If I could ask, the BRICS nations are working to establish a new global development bank, possibly to rival the World Bank and the IMF. But how big of a challenge do you think such a new establishment could put towards the IMF or World Bank?
CR: I don’t think it can replace them; it’s not going to replace them for most countries most of the time. But there’s two aspects they’re talking about. One is a development bank, which will be like the World Bank itself, providing funding for long-term infrastructure for example – the sort of things the private sector won’t do anyways. That could challenge the World Bank. The other aspect of this is the idea of setting up a foreign exchange fund to be there to intervene at a time of FX crisis. And that, if it were run by the BRICS, led by the BRICS and funded by the BRICS, might reduce dependence for some countries who otherwise would have no choice but to go to the IMF.
RT:Some critics are saying that the West is not particularly happy about the rising power of the BRICS countries, and could actually act to undermine this growing influence. You had mentioned that there is a European and American leader at certain top levels of the international financial system. Can a difference be made?
CR: I personally think the feeling the West is against emerging markets is almost a 20th century Cold War view of the world. It’s just not true. The West is delighted that there is somewhere in the world that’s growing faster than Europe and in most cases faster than America. It’s great.