Emerging Powers and Change in the Global Financial Order
| Date | 01 September 2014 |
| DOI | http://doi.org/10.1111/1758-5899.12133 |
| Author | Mikko Huotari,Thilo Hanemann |
| Published date | 01 September 2014 |
Emerging Powers and Change in the Global
Financial Order
Mikko Huotari
Mercator Institute for China Studies, Berlin
Thilo Hanemann
Rhodium Group, New York
Abstract
Emerging economies have become a major force in the world economy. This article examines the role of Brazil, Russia,
India and China (BRIC) in global finance and compares their potential to challenge the parameters of international
financial and monetary relations. Instead of focusing on changes inside the existing system of multilateral governance,
our analysis stresses the need to consider a broader set of channels to develop and exert financial power. Our compar-
ative assessment of BRIC economies’increasing autonomy, their strategic intentions, financial system capacity and the
behavior of subnational ‘power brokers’in global financial markets serves as a starting point to advance the debate
over ongoing structural changes in the global financial order. We show how increasing autonomy and financial power
have already led emerging markets to develop alternatives for crisis financing and development assistance. The pros-
pects for deeper cooperation among BRIC economies however remain gloomy, as the already very diverse preferences
with regard to global financial structures can be expected to further diverge.
Policy Implications
•The rise of new players in global finance requires leaders around the world to grapple with new realities. Research-
ers need to support this process and rely on new concepts and tools for assessing new trends in financial global-
ization, in particular the growing autonomy and influence of rising powers.
•Reforms of global financial governance in the aftermath of the financial crisis have not gone far enough. G7 leaders
need to recognize the need for greater policy coordination in an increasingly complex global financial system, and
explore new modes of collaboration that better link various layers of governance and allow rising powers like China
a greater weight in governance.
•Emerging powers have a strong self-interest in effective global financial governance, given the uncertainties they
face along their financial development path. Recent efforts by BRIC economies to increase collaboration outside of
established international financial institutions are a sign of greater autonomy and intent to step up their role. How-
ever, the prospects for long-term collaboration remain limited as the interests among BRIC economies will further
diverge. Emerging powers and China in particular therefore should continue to pursue reforms of existing gover-
nance mechanisms and take a leading role in identifying new mechanisms of global coordination.
Pathways of change in the global financial
order
Emerging and developing economies have become an
integral part of the world economy, accounting for more
than one-third of global GDP and more than half of eco-
nomic growth in the postcrisis years of 2010–2012.
1
As
emerging economies grow their weight in global output
and cross-border trade, they are also becoming more
important players in global finance. This article examines
the current role of the four biggest emerging powers –
the BRIC economies Brazil, Russia, India and China –in
global finance and assesses their potential to challenge
the parameters of international financial and monetary
relations. The underlying question is whether or not the
recent catch-up of these countries in terms of economic
strength will increase ‘financial multipolarity’, here under-
stood as a decentralization and fragmentation of the cur-
rent global financial order centered on the US and other
G7 economies.
The dominant strand in the academic literature on this
topic focuses on change inside the existing system of
©2014 University of Durham and John Wiley & Sons, Ltd. Global Policy (2014) 5:3 doi: 10.1111/1758-5899.12133
Global Policy Volume 5 . Issue 3 . September 2014
298
Research Article
To continue reading
Request your trial