Throughout the first decade of the new millennium China, along with the other BRICS nations, desperately tried to modernize the International Monetary Fund and World Bank by increasing their participation. With their attempts completely blocked by the US at every turn, they've sought alternative solutions. The NDB is the latest addition to the solutions they've created.
The IMF and the WB were created in the aftermath of WWII to meet the economic needs of the times. They have struggled since to fill the changing requirements of the modern world. Indeed, the role the US was given from the outset that of absolute arbiter, has proven their ultimate downfall. In the 2005 paper by J. Lawrence Broz, Associate Professor at the University of California, San Diego, entitled "Changing IMF Quotas: The Role of the United States Congress ," he demonstrates just how they were built with understanding that the US had absolute veto power over any quota change. This ability has, in turn, prevented any increased participation by other countries, especially China. With all avenues blocked within the IMF, China and the rest of the BRICS nations have had no other recourse but to create their own lending system in order to promote much needed infrastructure and quality of life improvements in third world countries across the globe. As a result, AIIB, which I previously discussed here and the NDB, which is presented here, have been created.
As the International Business Times aptly points out, "for years, economists have criticized the two institutions (IMF & WB) for imposing onerous conditions on loans to developing countries, which often must agree to painful "structural readjustment" programs to receive cash infusions. The World Bank and IMF, by tradition, are respectively led by an American and a European, and the world's wealthiest states have consistently refused to increase the developing world's voting share within each institution. According to Anna Snyder, an analyst at the New York-based economic consultancy Rhodium Group, the NDB is a natural consequence of these frustrations. 'The formation of the (NDB) bank is clearly a response to the fact that the IMF and World Bank wouldn't move on the voting share issue with emerging markets,' she said."
Under the new rules, no one nation will have veto power. Here's their official statement: "The New Development Bank BRICS (NDB BRICS), formerly referred to as the BRICS Development Bank, is multilateral development bank operated by the BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to the existing US-dominated World Bank and International Monetary Fund. The Bank is set up to foster greater financial and development cooperation among the five emerging markets."
The BRICS represent over 40% of the world's population and a quarter of the world's GDP. They embody the future of growth on the planet. They have structured their new bank in such a way that no country will have the power of the veto. The members will also establish a reserve currency pool worth over another $100 billion. China has pledged to contribute $41 billion; Brazil, India and Russia will each contribute $18 billion, while South Africa will contribute $5 billion.
The BRICS, but especially China, already have a heavy footprint in other third world countries through their own government loans. By joining forces these countries will only increase that effect and provide even more help to struggling nations across the globe who have been either completely neglected or given the choice of horrific loan conditions or no help at all. Starting in 2016 there will be an escalation in infrastructure improvement loans with much more favorable stipulations and easier terms for all. The IMF and WB will soon be relegated to history's annotations and who knows, maybe even a footnote in Texas history books showing how the founding fathers used both institutions to defeat the dinosaurs and end the Civil War (the one in which the Rebels won, of course).