Former Goldman Sachs economist, who coined Brics, has called “ridiculous”, the idea that the grouping of emerging nations could develop its own currency, as Brazil, Russia India, China, and South Africa are preparing to discuss the expansion of the bloc.
Lord Jim O’Neill, the chief economist of the Bank at the time, wrote in 2001 a research note that said the Brics “never achieved any results since they started meeting”. He used this phrase eight years before the 15th group summit.
South Africa is hosting the summit this year and has stated that a Brics-based currency is not part of the agenda.
O’Neill stated that it would be impossible to create a currency common for five economies with such a wide range of differences.
He said, “It is ridiculous” in response to the calls from Brazilian President Luiz Inacio Lula Da Silva and other members of the bloc for a “trading money”. “They’re creating a Brics Central Bank? How would you go about doing that? “It’s almost embarrassing.”
O’Neill created the Brics acronym as part of a Goldman Paper to emphasize the economic potential and need to reshape global economic and political governance in order to include Brazil, Russia India and China. The countries themselves adopted the term in 2009 and started holding summits.
With dozens of countries formally or informally expressing interest in joining the bloc, reported in the beginning of this year, that Saudi Arabia is in discussions to join the New Development Bank. The lender was set up in 2014 by the Brics as an alternative to World Bank. Egypt, Bangladesh, and the United Arab Emirates have since joined.
“I don’t really know what they are trying to achieve, beyond the powerful symbolism,” said O’Neill. He is now a senior advisor at UK think tank Chatham House.
He said that the dominance of the dollar in the global financial system is not good for developing countries. The dollar’s role in the world is not ideal. All these economies are dependent on the US Federal Reserve’s decisions in the interest of the US.
While the Brics, with a population of over 3 billion, are keen to use local currencies to facilitate trade between members, Leslie Maasdorp told Bloomberg TV in the last month that they were not in a place to create a single currency.
O’Neill said that despite previous predictions, the dollar would never be surpassed by the yen or euro. “This will only happen when these countries allow their currency to be used in other parts around the world.”
South Africa had to cancel the summit when Vladimir Putin, the Russian president, decided to not attend the event due to his being indicted by the International Criminal Court. South Africa, as a member of the ICC, would have had to arrest Putin upon his arrival. His foreign minister Sergei Lavrov is attending.
Reports suggest that India opposes India’s proposal to add more countries to the Brics Club.
O’Neill said, “It is a good thing for the west that China never agrees on anything because if they agreed the dollar’s dominance would be more vulnerable.”
“I tell Chinese policymakers this often. . . “Forget your endless battles in history and invite India to take the lead on some important issues. Then the world may start to take you more seriously.”