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The former Goldman Sachs economist who coined the Brics acronym has dismissed as “ridiculous” the notion that the group of emerging nations might develop its own currency.
His comments in a Financial Times (FT) article come as Brazil, Russia, India, China and SA prepare to discuss whether to expand the bloc. They will meet for the group’s 15th summit in Johannesburg next week.
Lord Jim O’Neill told the FT that Brics had “never achieved anything since they first started meeting”, eight years after he created the phrase in a 2001 research note he wrote as the bank’s chief economist.
Brics nations such as Russia and China have called for the bloc to challenge the US dollar’s status as the world’s reserve currency, but SA, which is hosting this year’s summit, has said a Brics currency is not on the agenda for the summit.
They’re going to create a Brics central bank? How would you do that? It’s embarrassing almost.
Lord Jim O’Neill, senior adviser, Chatham House
O’Neill said creating a common currency for the five strongly diverging economies would be unfeasible.
“It’s just ridiculous,” he said in response to calls for a “trading currency” from Brazilian President Luiz Inácio Lula da Silva and other politicians from the bloc. “They’re going to create a Brics central bank? How would you do that? It’s embarrassing almost.”
O’Neill coined the Brics acronym in a paper to highlight the economic potential of Brazil, Russia, India and China and the need for global economic and political governance to be reshaped to include them. The countries themselves embraced the term and began holding summits in 2009.
The FT article referred to remarks by an SA diplomat that dozens of countries had formally or informally expressed interest in joining Brics, which could be the bloc’s biggest leap forward in membership since SA joined in 2010. But criteria for admission have not been decided, and the issue of expansion has emerged as another faultline among the quintet.
US dollar ‘not ideal’
The FT reported earlier this year that Saudi Arabia was in talks to join the New Development Bank (NDB), the lender set up by the Brics members in 2014 as an alternative to the World Bank, and subsequently joined by Egypt, Bangladesh and the UAE.
“Quite what they attempt to achieve beyond powerful symbolism, I don’t know,” said O’Neill, who is now a senior adviser at UK think-tank Chatham House.
He said the dollar’s dominance over the global financial system was not beneficial for emerging countries. “The dollar’s role is not ideal for the way the world has evolved. You’ve got all these economies who live on this cyclical never-ending twist of whatever the [US Federal Reserve] decides to do in the interests of the US.”
While the bloc, which has a collective population of more than 3-billion, is keen to increase the use of local currencies in trading activity between member states, the NBD’s chief financial officer, Leslie Maasdorp, told Bloomberg TV last month that the Brics bloc was not in a position to create a common currency.
Reflecting on previous predictions that the yen, euro or renminbi would eventually surpass the dollar, O’Neill is quoted in the FT as saying: “None of these things will ever happen until those countries want to have their currencies used by people in other parts of the world.”
Source: Business Live
