The global economy was set up to reflect a bygone era, but even with the rise of BRICS, it will still be decades before the US dollar is dethroned as the dominant currency, Global Chief Economist Charles Robertson of Renaissance Capital told RT.
RT: The BRICS nations argue that the current
global economic order should be changed because it is out of date
or perhaps out of balance. What do you make of that?
Charles Robertson: To be totally fair, the architecture of
international finance was set up in the 1940s to reflect the
reality then, which was obviously American power, the UK’s power
and Europe in general. So, there are changes happening to the IMF
(International Monetary Fund) and World Bank, but still, the head
of these organizations is an American and there’s a European even
though there’s been a strong challenge. I think the BRICS are
saying they can’t be bothered to wait any longer for the IMF and
World Bank to change more dramatically. They’re going to start
making changes on their own.
RT:Do you think members of BRICS nations can work to
effectively counter the dominance of the US dollar and the
euro?
CR: There are two aspects here. As a trading currency, it makes
a lot of sense to have one single point of exchange – a currency of
exchange that everyone uses. It makes life simple. So I think as a
unit of exchange the dollar’s going to be dominant for a long time.
It took decades for the US dollar to take over from the British
pound and it’s going to take decades for the US dollar to lose its
dominance in trade. But in terms of saving money in foreign
exchange reserves, it makes an awful lot of sense not to use the
dollar as your only store of value. I think there’s a lot to be
argued in favor of buying into local currency debt in Russia,
Brazil, China. These are currencies which may well hold their value
better.
RT:So you’re talking about the diversification
ultimately of investing in various currencies, not just the
greenback. If I could ask, the BRICS nations are working to
establish a new global development bank, possibly to rival the
World Bank and the IMF. But how big of a challenge do you think
such a new establishment could put towards the IMF or World
Bank?
CR: I don’t think it can replace them; it’s not going to
replace them for most countries most of the time. But there’s two
aspects they’re talking about. One is a development bank, which
will be like the World Bank itself, providing funding for long-term
infrastructure for example – the sort of things the private sector
won’t do anyways. That could challenge the World Bank. The other
aspect of this is the idea of setting up a foreign exchange fund to
be there to intervene at a time of FX crisis. And that, if it were
run by the BRICS, led by the BRICS and funded by the BRICS, might
reduce dependence for some countries who otherwise would have no
choice but to go to the IMF.
RT:Some critics are saying that the West is not
particularly happy about the rising power of the BRICS countries,
and could actually act to undermine this growing influence. You had
mentioned that there is a European and American leader at certain
top levels of the international financial system. Can a difference
be made?
CR: I personally think the feeling the West is against
emerging markets is almost a 20th century Cold War view of the
world. It’s just not true. The West is delighted that there is
somewhere in the world that’s growing faster than Europe and in
most cases faster than America. It’s great.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.