CC BY
22
NEW DEVELOPMENT BANK IN A WORLD FINANCIAL SYSTEM
© Mikhaylyuk A.G*
Financial university under the Government of the Russian Federation, Moscow
After collapse of the USSR and the world system of socialism in 1991 influence of the USA became much stronger. The USA with its political and ideological allies such as western countries, Japan, Australia conduct a course in line with the American economic policy, they together control the voting rights of the Bretton Woods institutions and furiously oppose their reforming. The four largest emerging and developing economies by nominal GDP, according to the most recent World Economic Outlook report by the IMF, China, Russia, Brazil, India feel restrained because cannot influence policy of these institutions. In recent years China and Russia even more often criticize decisions made by the International Monetary Fund and the World Bank as they are caused by severe conditions of control of the budgetary discipline, and political such as development of democracy, open market economy that, for example, for the current political model of China is unacceptable. Today the example of Four Asian Tigers challenges need of a democratic political system for formation of strong market economy, within institutional economics influence of sociocultural factors on economic growth is considered. At the same time, there are various points of view about rigid control of the budgetary discipline because it does not stimulate demand and respectively shrink economy [1].
Keywords: Sustainable development, Global financial challenges, Bretton Woods system, BRICS, New Development Bank, International Monetary Fund, World Bank, neoliberalism.
Presently many scientists are engaged in search of the decision for preservation of balance between two opposite categories - progress and stability. At the Brundtland Report sustainable development is defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts:
- the concept of needs, in particular the essential needs of the world's poor, to which overriding priority should be given; and
- the idea of limitations imposed by the state of technology and social organization on the environment's ability to meet present and future needs [2, p. 41].
The development of human civilization has undergone extensive transformation under the influence of scientific, technical and social progress. The Industrial Revolution in the 18th century triggered socioeconomic development. In the com-
Master of sciense student.
Мировая экономика
25
petitive struggle for profit and wellbeing increases the likelihood of global challenges and threats. Particularly, financial markets destabilization leading to the current global financial and economic crisis and its global negative consequences. Exploitation of natural resources intensified destroying the planet’s natural ecosystems. Environmental pollution leads to man-made and natural disasters provoking the global epidemics and health threat. Global population growth in Third World countries exacerbates global food and energy crises. In recent decades increases the risk of international terrorism and geopolitical uncertainties. For these reasons it is difficult to consider influence of global financial problems on the concept of a sustainable development in a certain time period; both concepts are complex, dynamic and develop together with a civilization.
Global financial crisis of 2007-2008 showed that radical transformations of all economic models are inevitable. In little more than 70 years passed from the date of the Bretton Woods agreement, which reshaped the international financial system by creating the International Monetary Fund, World Bank and World Trade Organization. Besides that new functions were delegated to the Federal Reserve System of the USA, having made it not national, but the international issue center - as the gold, the US dollar was entered as the international means of payment in international transactions. After 1971, default the United States suspends convertibility of dollar into gold, having made thereby unilateral revision of the international monetary system. However, it did not narrow a dollar zone and not strongly affected creation of a world financial system.
Set up during Bretton Woods Conference institutions are keepers of the current US dollar-based system and ban on using currencies other than US dollar. They take an active part in advance the concept of the Washington Consensus and ideas of neoliberalism in developing economy. The Washington policies of neocolonialism led to that many countries lost their economic independence, because are compelled to tie issues of national currencies to the sizes of dollar reserves held by the issuing central banks. The developed countries fleece resources from weaker countries that lead to destruction of agricultural sector, the extracting and processing industry of these countries, turning them into a sales market for the western goods. To this point of view, adhere also «Mercury club» members, accused neoliberals of responsibility for crisis in Russia [3].
Question in that, gaining economic power developing countries want to be more politically significant. Today the largest economic center are not only the USA, but also the China, their interests are not always similar, and more often are competing among themselves that can lead to crash of the unipolar world. Thus, for preservation and evolution of economic and social systems there is a need of creation and development of large international associations (the EU, SCO, BRICS, etc.) and the economic unions.
Still in a 2003 paper titled «The World Needs Better Economic BRICs» [4] Jim O’Neil from Goldman Sachs analyzed the rapid growth economies of the
26 ЭКОНОМИКА И УПРАВЛЕНИЕ: АНАЛИЗ ТЕНДЕНЦИИ И ПЕРСПЕКТИВ РАЗВИТИЯ
world are emerging markets and was first coined the BRIC designation for Brazil, Russia, India and China as leading economies in this list. Goldman Sachs forecasted that in less than 40 years, in US dollar terms the BRICs economies together could be larger than the G6. By 2025 they could account for over half the size of the G6. Of the current G6, only the US and Japan may be among the six largest economies in US dollar terms in 2050.
In its 2005 Economics Paper «How Solid are the BRICs?» [4] Goldman Sachs identified another group of emerging markets called the «Next 11» with the potential of dynamic growth and promising developing, including: Mexico, Korea, Nigeria, Vietnam, Bangladesh, Philippines, Indonesia, Pakistan, Egypt, Turkey and Iran.
From the point of view of formation of new institutions 2013 is sign, at support of China - for the purpose of support the strategy of a New Silk Road - announced about creation of two development banks Asian Infrastructure Investment Bank (AIIB) and New Development Bank BRICS (NDB).
On October 24 2014, the establishment of the AIIB formally recognized in a signing ceremony held in Beijing. The Memorandum of Understanding of AIIB was signed by 21 countries, but of 15 April 2015, there are 37 Prospective Founding Members in the region and 20 Prospective Founding Members outside the region. In interview to Financial Times on April 15 2015, China’s Premier Li Ke-qiang to the specific question of whether China wanted to replace the Bretton Woods institutions - the International Monetary Fund and the World Bank, Mr. Li was categorical: «There is no such thing as breaking the existing order» [6].
On 15 July 2014 in Fortaleza, Brazil, at the Sixth BRICS Summit [7] the leaders of the BRICS countries signed the agreement establishing the $100 billion New Development Bank to be headquartered in Shanghai, and the treaty for the establishment of Contingent Reserve Arrangement (CRA) of the same size. These institutions aim to be both competitor and antithesis to the International Monetary Fund and the World Bank, but that else is important they give to all member countries equal voting power at 20 %.
We think the establishment of New Development Bank in the long term it is a signal of a new financial world order, in medium-term prospect it will be economically successful bank increasing its lending capacity, from the point of view of a short-term outlook is more based in politics surrounding voting power of the IMF.
Considering a short-term outlook it should be noted that voting power at the IMF is based on a quota system, each member country is assigned a quota, based broadly on its relative position in the world economy (the current quota formula is a weighted average of GDP, openness, economic variability, and international reserves). A member country’s quota determines its maximum financial commitment to the IMF, its voting power, and has a bearing on its access to IMF financing [8]. However, these quotas were not reconsidered for many years while contribution to global GDP from the BRICS countries strongly. As a result, the
Мировая экономика
27
BRICS countries carry a disproportionately low weight of participation power in the IMF. Reforms to allow more rights for voting power to BRICS countries and other emerging economies were coordinated by G20 in 2010 [9], but are not yet in effect as the Congress doesn’t approve it. Scandals related to Dominique Stra-uss-Kahn former managing director of the IMF connect with ardent unwillingness of the USA, which holds 16.75 % of the IMF’s voting power and approval is required to fulfill an 85 % supermajority, to carry out such reforms.
Speaking about medium-term prospect the NDB won't be able to compete with IMF as it is based on a dollar paradigm, but could be economically successful financing large infrastructure and innovative projects (power industry, transport, etc.) of member and other developing countries where the profit is more than real increasing thereby the its lending capacity. We would like to note that Contingent Reserve Arrangement formed by NDB as the alternative of the IMF can really be considered, it can be used for financing of an imbalance of foreign trade, capital outflow, correction of exchange rates.
The expert community even more often discusses questions of a public debt of the USA, budget deficit, the balance of payments, dollar prospects as world currency and prospects of a modern financial system where the leading role plays USA. To imagine, for example in the long term 20 years, a collapse of dollar and a sovereign default of the USA it is difficult, as the USA is the most powerful not only in economic, but also in the scientific and technical and military relation country. For this reasons it is the most attractive country for investments and the biggest debtor country. In order that investors began mass to leave from the USA market on other capital markets, there have to be conditions that are more attractive. So attractive and stable markets as the USA, aren't present so far. Major foreign holders of US treasury securities are China and Japan [10]. As of February, 2015 31 % of foreign exchange reserves of China, 70 % of Brazil, 30 % of India, 19 % of Russia are placed in treasury bonds of the USA. Sharp change of a role of dollar in monetary and reserve systems creates big risks for stable economic and financial participation of these countries to world economy. As the most part of world trade, bank assets and liabilities, securities, currency transactions are in the US currency, at a dollar collapse not clearly who will suffer more the creditor or debtors.
Each system has a life cycle and of course, dollar as the world financial currency will be replaced by other national or supranational currency, but on the near-term outlook, such alternative isn't present.
List of references:
1. Krugman, P., & Continued, W. a. (2015, February 15). http://krugman. blogs.nytimes.com. New York, USA.
2. World Commission on Environment and Development. (1987). Our common future (Brundtland Report). Oxford University Press, p. 41.
28 ЭКОНОМИКА И УПРАВЛЕНИЕ: АНАЛИЗ ТЕНДЕНЦИИ И ПЕРСПЕКТИВ РАЗВИТИЯ
3. Bikbov, A. (2015, April 03). Politicians and economists found responsible for crisis in Russia. Moscow, Russia.
4. O’Neil, J. Building Better Global Economic BRICs. (2001, November 30). www.goldmansachs.com. Retrieved 03 08, 2015, from http://www.goldman-sachs.com/our-thinking/archive/archive-pdfs/build-better-brics.pdf.
5. O’Neil, J.; Wilson, D.; Purushothaman, R.; Stupnytska, A. How Solid are the BRICs? (2005, December 01). www.goldmansachs.com. Retrieved 03 08, 2015, from http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/how-solid.pdf.
6. Barber, L.; Pilling, D.; Anderlini, J.; Interview: Li Keqiang on China’s challenges. (2015, April 15). http://www.ft.com. London, United Kingdom.
7. MINISTRY OF EXTERNAL RELATIONS OF BRAZIL. (2014, July 15).
Sixth BRICS Summit - Fortaleza Declaration. Retrieved from http://brics6.itama-raty.gov.br: http://brics6.itamaraty.gov.br/media2/press-releases/214-sixth-brics-
summit-fortaleza-declaration.
8. International Monetary Fund. (2015, April 9). IMF Quotas. Retrieved from http://www.imf.org: http://www.imf.org/external/np/exr/facts/quotas.htm.
9. International Monetary Fund. (2013, August 5). G20 Agreement on Quotas and Governance. Retrieved from http://www.imf.org: http://www.imf.org/exter-nal/np/exr/faq.
10. U.S. Department of the Treasury. (2015, February). MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES. Retrieved from http://www.treasury. gov: http://www.treasury.gov/ticdata/Publish/mfh.txt.
ТЕНЕВАЯ БАНКОВСКАЯ ДЕЯТЕЛЬНОСТЬ КАК ОБЪЕКТ МЕЖДУНАРОДНОГО ФИНАНСОВОГО РЕГУЛИРОВАНИЯ
© Парамонов Д.Р.*
Финансовый университет при Правительстве РФ, г. Москва
«Теневая банковская система» в целом может быть охарактеризована как «кредитное посредничество с участием лиц и видов деятельности, находящихся полностью или частично за пределами регулярной банковской системы». Такое посредничество представляет ценную альтернативу банковскому финансированию, оказывая поддержку реальной экономике. Но опыт последнего кризиса демонстрирует способность некоторых небанковских учреждений и операций при работе в крупных масштабах порождать риски банковского типа для финансо-
Магистрант.
