Late last month, leaders from Brazil, Russia, India, China and South Africa – the so-called BRICS – announced they were forming their own development bank to assist other emerging economies. The yet-to-be-named bank is expected to compete with the World Bank and the International Monetary fund, two institutions with power structures based firmly in the United States and Europe.
The announcement also serves as yet another sign that the world economy is quickly evolving to a place where United States global economic dominance is being challenged by regional interests. Since the end of World War II, the United States was the driver of global monetary policy. When the Federal Reserve acted, the world listened and reacted.
Now, according to officials from the BRICS nations, emerging countries are trying to insulate themselves from the market shocks caused by the United States and Europe. They no longer trust the West to do the right thing. They’re forming their own “union” to create stability that the World Bank, the International Monetary Fund and the Fed have been unable to provide.
BRICS Not Alone
In the wake of the global financial crisis, other countries are seeking alliances that will make them less reliant on the West. During the financial crisis, Japan, China and South Korea created a $120 billion emergency loan fund to shore up Asian nations’ finances. The Association of Southeast Asian nations, comprised of 10 countries from that part of the world, is also experiencing a period of robust growth.
New partnerships are also emerging closer to home. Álvaro Uribe, former president of Colombia, recently told The Fiscal Times that his country is considering entering into a formal economic alliance with Mexico, Peru and Chile, creating a bloc with a GDP of $2.2 trillion. These countries have already agreed to eliminate trade tariffs on 90 percent of the goods exchanged between them.
But the biggest challenge to U.S. dominance remains in Asia. The Pentagon is shifting its strategy to confront potential rivals in that part of the world. And U.S. companies are gaining ground in huge consumer markets in China, Indonesia and Malaysia.
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