The World Bank and the IMF, the two big international financial institutions, have been too slow to embrace change. But they are showing signs of evolving, admitting that austerity is not always the answer, Françoise Nicolas told EURACTIV’s partner Ouest-France.
Françoise Nicolas is a researcher at the French Institute for International Relations in the department for Central Asia.
The vice-president of the New Development Bank (formerly referred to as the BRICS Development Bank) believes the world’s great economic powers have made poor use of the global financial institutions. What do you think?
It is part of his job to say that. What we can say is that they are not suitable for the new realities. The world’s problems have evolved since they were created. There is a certain inertia, a lack of adaptability. But that is changing.
The IMF reformed its structure in 2015, giving China the right to vote. But the power of emerging countries is still very limited. China still has three or four times less influence than the United States. But the vision of the IMF and the World Bank has changed. Over the last 20 years, the World Bank has adopted a more progressive vision of development, taking into account local problems. Different subjects have been raised, such as the environment. Its approach is more complete.
And the IMF? The fund has always sat firmly on the fence on what it perceives as ideological issues. It is accused of being the champion of ultra-liberalism.
Yes, but it is beginning to soften its discourse. After the financial crisis in Asia around the turn of the century, it started to really re-examine itself. Before, the IMF was very hostile to any controls on the free movement of capital. This is no longer the case today.
Now it is starting to reconsider its principle of imposing budgetary austerity at any price. We are beginning to hear that a bit of economic stimulus would not be such a bad thing at this stage. And even that a bit of a deficit may be tolerable. They will discuss these issues at their annual meetings (7 to 9 October), because they fear we might be in for a long period of anaemic economic growth in the years to come.
What do you think of the New Development Bank?
I am very sceptical. It is only coherent in the wrong ways. The interests of the BRICS (Brazil, Russia, India, China and South Africa) only convergence around their desire to change the current balance of power. Russia has a very different stance to the rest of this group. And South Africa is only there for political correctness.