By JOSHUA NATHANIEL, YU AHYONG
WASHINGTON — When Malaysian Prime Minister Mahathir rejected the help of the IMF during the Asian financial crisis, it was a surprise to many. Malaysia was one of the hardest hit countries in the crisis and its neighbors had already sought help from the IMF. Despite Mahathir’s questionable character – blaming the crisis on speculators, blaming the Jewish community for the crisis and calling George Soros “a moron” – he did make a strong argument for rejecting the IMF loans. He believed that Malaysia was “different from the other countries” that the IMF had helped in the past. True, the Washington Consensus had failed when it applied its cookie-cutter policies from Latin America to post-Soviet Eastern Europe. Economist Joseph Stiglitz criticized the IMF and World Bank for failing to take into account the real needs of developing countries. The Washington Consensus, the IMF and the World Bank, however, were never formally challenged – until now.
Beijing has led the way for the creation of a BRICS bank, called The New Development Bank (NDB). With $50 billion of initial funding, and an array of members from developing countries, the bank is set to challenge the hegemony of traditional lending institutions. The question is whether the United States and other Western countries should feel threatened. Where Japan feels there is no need for the NDB, itself preferring the Asian Development Bank, countries like Australia and the United States do not formally have a say.
The real question for these countries is what it would mean to have a ‘Beijing Consensus’ working side-by-side with the Washington Consensus? Would it really be a total change to the global political order? It may not be. For one, the New Development Bank is not competition for the IMF, World Bank and ADB. It is, in fact, a complement to these multilateral institutions. Whereas presently you have a singular solution instituted by developed countries, the NDB provides a solution created by developing countries, for developing countries. This is not to say that developing countries have better solutions; it is just an opportunity to provide alternatives to the current order.
Therefore, opposed to the belief that the NDB may create a ‘new world order’ with Beijing leading the way for China’s hegemonic rise, the NDB is really about developing a better global balance of power – shifting the power of development from developed countries to developing countries. Hence, there should be no fear about competition. Rather, the NBD should be viewed as an attempt at cooperation between developed and developing countries.
As can be seen, the creation of the New Development Bank gives birth to many questions. Some wonder if it will adhere to the same policies, framework and goals of traditional lenders. Additionally, some question the ability for BRIC countries to lead an effective international financial institution. Yet, just as Curtis Chin, former U.S. Ambassador to the ADB, has said, it would be unfair to condemn the bank at the onset. Nevertheless, while the NDB is yet to complete anything substantive, the bank represents a message to the West and other developed countries; a message declaring, “If you can do it, we can do it too.”