Move Aside, G-7--The Big Posse Is Taking Over

BRIC and the rest of the Group of 20 have decided that the industrialised nations of the Group of 7 aren't doing a good enough job of mismanaging the global financial system. So, they want to move on in.

"Wait one, Geek! What's this BRIC thing?"

The acronym stands for the following countries: Brazil, Russia, India and China. These are the biggest of the so-called "emerging economies." They believe they are very, very important to the health and stability of the global financial system.

The new posse had a meeting in Sao Paulo, Brazil a couple of days ago. At the meeting last Friday, which preceded a conference of the finance ministers and central bankers from the G-20 nations, the president of Brazil blamed the current financial meltdown and its consequence, a global recession, on the G-7 states.

Well, golly, President Luiz Inacio Lula da Silva, you must be a combination of Allen Greenspan and Sherlock Holmes to have figured that out. It seems about as difficult as determining that a heart attack starts with the heart.

And, whether President Lula likes it or not, the countries of the G-7 are the economic heart of the planet. That reality governs whether you look at the global economy from the perspective of Beijing, or Moscow, or East Clearfahrt, North Dakota.

An equally unpleasant reality is that the United States sits at the very center of the Earth's economic heart. This is true whether one looks at consumption and all the global activity that liberal bete noir creates or finance and all that implies in the movement for good or ill of capital, risks and jobs.

The Brazilian president and his confreres want, even demand, a greater role for the emerging economies of BRIC and the other G-20 members as well as the lesser developed countries in the creation and running of a new international financial structure. In Lula's words "a new, more open and inclusive governance."

Right. The Geek agrees. It's a nice idea. Utopian even. But, the Geek wonders, just who is going to participate in this more open and inclusive system?

Obviously, the lads from BRIC believe they should play a major role. OK. Why not?

If the Geek remembers correctly, back in the 1930s and even in the 1950s there were economists predicting that Brazil along with Argentina would rival or even surpass the US economically by the end of the 20th Century. What happened? To compress a long and dreary history punctuated from time to time with blood, both states careened from Statism of the Left to Statism of the Right. This lurching in a drunkard's walk search for prosperity had the wondrous effect of retarding both countries.

The Russian experience with open and inclusive markets is, if one feels charitably inclined, minimal. The Russians have shown over the course of the past century that they are equally inept at operating command economies, a wide-open frontier market, and the new, improved Putin-directed hemi-demi-semi capitalist system. There is no doubt that the Kremlin input to a new global system would be more to the perceived advantage of Russia than the rest of the world.

The same may be said of China. The Chinese Miracle of Growth has been predicated upon the rampant exploitation of labor, wholesale destruction of the environment and promotion of greed on a level which would (almost) shame the famed Robber Barons of the US more than a century ago. Furthermore, the Chinese Miracle of Growth would not have happened without the ill-advised giveaway brokered by President Clinton around ten years ago. The Chinese neo-mandarinate has copious skills focused with laser intensity on the promotion of Chinese strategic interests. Trade and finance are like guns and warships--instruments of national power. Period.

While India has torn itself away (in part) from its long love affair with Left Statism, its current growth is predicated upon a small sector of overall economic activity with the result that the distribution of wealth in the country is even more deformed (if such could be possible) than it is in the United States. India has a large population of very poorly paid individuals for whom the government still believes it has a responsibility. Wealth transfers (both internal and from external sources) of a very major nature will be necessary in the short- and mid-term if the needs of this economically marginal majority are to be met--and, Indian political stability not more impaired than it already has been.

President Lula averred that the IMF agrees with the crucial nature of the developing countries to the world economy by quoting a statement by the Fund's president to the effect that seventy-five percent of the global economic growth will be seen in the developing world. Duh. Percentages are a sleazy game to play. The IMF chief and Lula both know that very small absolute changes become very large percentage shifts when the starting point is low.

Don't get the idea that the Geek is a cheerleader for the fad of the past twenty years--globalization--let alone the dictatorial thuggery engaged in by the IMF and World Bank in promoting the interlocking agendas of globalization and privatization. He is not. The human costs of these handmaidens of change have been high, too high. The impact of privatization and the movement of capital across borders, particularly as enforced by the World Bank and IMF, has been huge, and largely negative. The Law of Unintended Consequences was invoked as seen by the election of such as Chavez and Morales.

The same Law may be invoked again--soon. And, not to the advantage of the US and other members of the G-7. The negatives of globalization and privatization have rested too hard on the lesser developed countries of the world. The benefits have accrued too exclusively to the G-7 and (much as the governments would deny it) BRIC countries as well.

The uniquely Western tendency toward recurrent waves of guilt over success and prosperity as well as the drive to "fairness" and "equality" which break the surface of Western thought so often and so strongly make most of the G-7 countries ripe for acceptance of the argument put forth at the BRIC meeting. The message? It's time for a change.

The Geek agrees that change is necessary. But, it must not be a "change" dictated by debtor nations, or the ambitious and far from altruistic BRICers. Any movement by the US toward embracing necessary changes in the international finance system must be made in the same way as conservative foreign policy generally.

Proceed from a realistic understanding of national and strategic interests of the United States, first and foremost; understand the historical context driving the actions of all the actors; go with a course of action which meets American needs and interests at the lowest realistic loss to others.

Anything else will bring the invariable Law of Unintended Consequences into play again.