Olatunji Ibrahim Student No 139050186

BRICS, IMF and World Bank.

IMF and the World Bank was both created by John Maynard Keynes, who is consider one of the greatest economist of the twentieth century. Many people do not know the difference even getting confused and swapping the two institutions jobs around. (Driscoll, 1995) International monetary fund and World Bank are both the Bretton woods institutions. The Bretton woods was created during post-war, the agreement established a US based international monetary system. The role of both institutions is to mostly control the economic and financial activities of the world this means strengthening and stabilization the economy. Both of them are owned and control 180 counties, many believe this is not the case and super powers like United Stated seem to be the ones calling all the shots.

International monetary funds IMF was set up to takes on payment and receipts of different countries; they seek to try maintain an orderly system. (Driscoll, 1995) IMF main concern is to oversee the exchanges rate. (Driscoll, 1995) explained that the have two changes during the institution 50 year life-span, in 1973 the IMF was in charger of make sure that the major rates where able to exchange witch each other. Furthermore the institution was tasked with the monitoring of fixed rates that are connected to gold, and finally the IMF was available for short-term financing for nations that need small and short term financing. (Driscoll, 1995) This proves to be much for the IMF and lead to complication that forced mistake, maintaining the system became harder to do. With this gave rise to unstable rates. This pushed for reform in the organization. This lead to the second Phase of the IMF (Driscoll, 1995) this stage showed more broadening structure that are able to withstand the different challenges that might occur. Some of the new structure changes included a new supervised system that helps with their payment balances. World Bank The World banks roles and duties differ from the IMF. The bank was created to help less economical counties develop. (Driscoll, 1995) the bank does this by providing funding and technical assistance. The bank runs project and policies to help these counties gain a more economical stand. The Bank gives particular attention to projects that can directly benefit the poorest people in developing countries"(Driscoll, 1995). The Bank has gained a lot of support because of its high involvement in the poorest countries and poorest people. This was expressed in (Driscoll, 1995), when the author says that World bank in committed to projects that help poor to be more productive which include water and electricity plants. These actives show the importance of the World Bank involvement in the third world issues. Before the 2008 economic crisis the IMF lending capacity was around US$ 250 billion. In 2014 is reaching US$ 1 trillion. (Anon, 2015)

BRICS

BRICS The BRICS are a group of counties. Brazil, Russia, India and China with a recent inclusion of South Africa. Over the last past ten years these counties have had great economic growth.

Figure one shows the power of the BRICS, as shown even during the 2008 cash, we see that the BRICS still showed good numbers. The BRICS have showed great economic growth throughout the decade, with this growth they been allowed to afford other projects. For examples they have now cooperated to create a bank, thats said to rival the Bretton woods institutes. A reading of the BRICs development bank a dream coming true stated that a new fundamental change in the economic world. (Griffith-Jones, 2014) The BRICS understand that there are many more problems with many emerging countries even with the help of the World Bank. So knowing this the BRICS has long-term solution for the many problems developing counties are facing.

The two banks the similarities and differences between them

The BRICs and IMF plus the world banks are both set out to do the same job, but might differ in the approach on how to help its members. Many dont believe the BRICs shout and screaming about how they bank would be nothing like the current ones of IMF and World Bank. (Pieler, 2013) argues that the BRICs dont seem to have originality. Furthermore he continues to say that the BRICs propose is just mimicking the Bretton Woods organization. (Pieler, 2013) This does seem to be true at first glances.The BRICs NDB does bare its blueprints for the Bretton woods twins, for example the NDB works on power sharing. With the founding member all having a say on what goes on. Another factor can be that both only fund developing counties with foreign aids. Member input is this required for stake more money more stake you have on central decision.

What makes them different?BRICs as stated earlier would like for counties to see the project, as something thats better and nothing like the Bretton woods organizations. The BRICS claim around 1/5 of the global GDP (Desai & Vreeland, 2014). But in comparison to the votes they have its a measly 11 percent. Especially china that have been said to demanding a larger role in the Bretton Woods institution (Desai & Vreeland, 2014) This needs to change, a system with a better voting systems which can allow for those with less economic standing to able to have a say, the IMF system does allow for this foe example within the IMF with Americas voting power amounting to 17%, more than the BRICS combined (Hartley, 2014).

(The Economist, 2011)

Figure 2 shows the differences between the BRICS voting power compared to the USA. Unlikely the Bretton woods institutions, the BRICS are not judging there voting right solely on who invests the most. The founding nations will share 55 percent between them leaving 45 for new members. (Epstein, Shirvani and Yoon, 2015) even though china is the strongest nation in the Bank and BRICS the 55% would be shared equality.

Not only in the voting system that the NBD project differs for the Bretton woods twins, it also allow for more leeway for the nation to run they on financial projects. When nation ask for help from the IMF for credit benefits, usually ends in the IMF demanding the nation to follow the sometimes unrealistic financial policy, and these could lead to negative affect to the nation for example Russia. Another prime example is Argentina collapse through advise for the IMF. (Takagi, 2004) The BRICs unlike the major nations in the Bretton woods institution, know what it feels like to be a country thats developing, through decades of great growth the have the experiences and credibility when it comes to economic development. (Epstein, Shirvani and Yoon, 2015) NBD is said to offer new member more freedom and a better chance to improve their economical strength. NBD proposed limited involvement might come from the fact it doesnt have the financial standing as the IMF and World Bank, so setting them selves as more of s start bank. (Epstein, Shirvani and Yoon, 2015) expressed that even without the same funding strength of Bretton woods twins it would still prove attractive option for countries weary of western dominance when dealing with IMF. The BRICs affect on the south has be noted for example Brazil involvement in Africa in recent years, and of course china being Africa most important trading partner. (Washington Post, 2014) hence south to south trading has now pasted north to south trading by around 2.2 trillion.

The biggest difference would be how the two banks are run. IMF is run by a government board, which control decision-making and funding budget. The CEO of the IMF is usually either European or American, many have called for a different system in who can be come the leader, but fall on deaf ears. The BRICs NBD is very different; the headquarters would be based in china. The president would be done in a revolving basis, and done in a way that the entire founding member will have a leader at one point. (Marsh, 2015) The IMF have be said to create even more inequality, with they structure adjustment, which forces developing nation to cut down on certain sectors for example health and education (Globalexchange.org, 2015). Furthermore IMF sometimes-harsh policy force nations to change currencies to make for cheap exports, which might be detrimental to the nation.

Can the BRICs NDB be a reality? The BRICs to others are peculiar different from other who have tried to create such a project, they span four continents and share no common language (Epstein, Shirvani and Yoon, 2015) But they seem to be gathering a lot of support for the NDB, sometimes seen as a counterweight to the western powers like the IMF but how long would this last (Epstein, Shirvani and Yoon, 2015). With this though the BRICs have made the first step becoming collective global leadership group. One of the big reasons why some dont believe that the BRICs NDB would not work is the influence of china to the BRICs project. With largest stake in the NDB china may become another America dominating the decisions. Furthermore even though the BRICs seem united on the surface they still have internal problems to face. (Pieler, 2013) expressed that Russia is heavily reliant on china, well china and India seem to be at odds for longstanding territorial issue. With these examples show how fragile an alliance can be so expiration on the NDB should take into consideration that even though in name they founding countries are united, most of them have different agenda. With this been said the IMF been the only point of call is also a reality that doesnt seem good for all. As stated in the earlier passages IMF seem to only focus on wealthy nations and Wall Street. (Globalexchange.org, 2015) Unlikely the BRICs NDB that as a more equals voting system, the western powers affect and run the IMF most decision-making. This will must likely force developing nations to fund the BRICs bank more. This seems to be the only I can see the BRICs NDB project actually working because only like the Bretton woods twins NDB doesnt have the same financial power, with a total of 100 million (Epstein, Shriven and Yoon, 2015) while the world bank said to dwarf that with a ratio of five to two. (Epstein, Shirvani and Yoon, 2015) The BRICs NDB I believe can never really rival the Bretton woods organization, which has almost 40-year head start on them, but I believe if the NBD goal is to be a credible developing economy alternative to the IMF and WB than thats very well achievable. (Epstein, Shirvani and Yoon, 2015) highlighted that the NDB can further help and develop the IMF and WB, by helping with the stabilization the development of the worlds emerging nations. Providing an alternative whennecessary (Epstein, Shirvani and Yoon, 2015) If the BRICs take this approach I believe that they could be a welcome alternative to the Bretton woods institution. Even with this I still believe the BRICs still might fall with mainly cause of internal and some external factors, like the US and Europe.

ReferencesAnon, (2015). [online] Available at: http://www.seminario2014.abri.org.br/resources/anais/21/1406577711_ARQUIVO_TheBRICSDevelopmentBankformation13.pdf [Accessed 4 May 2015].Driscoll, D. (1995). The IMF and the World Bank. Washington: International Monetary Fund.Epstein, D., Shriven, T. and Yoon, K. (2015). New Development? The BRICS Bank and the International System. [online] Harvard International Review. Available at: http://hir.harvard.edu/archives/8273 [Accessed 3 May 2015].Flows, C. (2014). BRICS New Development Bank Threatens Hegemony Of U.S. Dollar. [online] Forbes. Available at: http://www.forbes.com/sites/realspin/2014/12/22/brics-new-development-bank-threatens-hegemony-of-u-s-dollar/ [Accessed 1 May 2015].Globalexchange.org, (2015). Top Ten Reasons to Oppose the IMF | Global Exchange. [online] Available at: http://www.globalexchange.org/resources/wbimf/oppose [Accessed 4 May 2015].Griffith-Jones, S. (2015). A BRICS DEVELOPMENT BANK: A DREAM COMING TRUE?. [online] Available at: http://unctad.org/en/PublicationsLibrary/osgdp20141_en.pdf [Accessed 1 May 2015].Marsh, D. (2015). Why are the BRICS starting a bank? And 9 more FAQs. [online] MarketWatch. Available at: http://www.marketwatch.com/story/why-are-the-brics-starting-a-bank-and-9-more-faqs-2014-07-21 [Accessed 3 May 2015].Pieler, J. (2013). A 'BRICs' Bank? No Thanks, The IMF And World Bank Are Bad Enough. [online] Forbes. Available at: http://www.forbes.com/sites/laursonpieler/2013/04/22/a-brics-bank-no-thanks-the-imf-and-world-bank-are-bad-enough/ [Accessed 1 May 2015].Takagi, S. (2004). The IMF and Argentina, 1991-2001. [Washington, D.C.]: International Monetary Fund, Independent Evaluation Office.The Economist, (2011). Light-weight BRICS. [online] Available at: http://www.economist.com/blogs/dailychart/2011/06/imf-influence [Accessed 3 May 2015].Washington Post, (2014). What the new bank of BRICS is all about. [online] Available at: http://www.washingtonpost.com/blogs/monkey-cage/wp/2014/07/17/what-the-new-bank-of-brics-is-all-about/ [Accessed 4 May 2015].