Weekend Economists Salute Our Favorite Bunnies March 29-31, 2013

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36. The BRICS Expose the West’s Hypocrisy

http://www.bloomberg.com/news/2013-03-28/the-brics-expose-the-west-s-hypocrisy.html

Who do they think they are, these upstart economies, Brazil, Russia, India, China and South Africa?

That might sum up the feeling in the U.S., Europe and Japan as the BRICS nations consider a new development bank that might challenge the World Bank and International Monetary Fund. The move brings to mind Alice Amsden, the Massachusetts Institute of Technology economist who died last year, and her 2001 book, “The Rise of ‘the Rest.’”

The richest nations can stew about this turn of events, as those on the periphery of the world economic system start seeing themselves as the core. Or developed countries can look in the mirror and consider how their actions have helped accelerate the shift.

Take Japan’s success in weakening the yen 17 percent in the past six months to help stimulate exports. It has prompted talk in China and elsewhere about a return to the currency wars. Concern about exchange-rate volatility that undermines trade and growth is a big reason the BRICS, the vanguard of “the rest,” want to use their combined $4.4 trillion of foreign-currency reserves to protect their economies and raise their international clout.

The yen’s plunge coincides with the contortions of the IMF as it twists every which way, and then some, to preserve the euro. Never mind that the euro zone may be too messy and incompatible to save. Forget that Cyprus never should have been included in the enterprise, or that Spain’s 50 percent youth- unemployment rate makes the euro area’s fourth-biggest economy a potential time bomb. The IMF, run by former French Finance Minister Christine Lagarde, is determined to make the unsustainable in Europe sustainable.