Emerging Powers and Change in the Global Financial Order

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 comparative 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 prospects 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.

The rise of new players in global finance requires leaders around the world to grapple with new realities. Researchers need to support this process and rely on new concepts and tools for assessing new trends in financial globalization, 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. However, 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 governance mechanisms and take a leading role in identifying new mechanisms of global coordination.