Why a Brics-built bank to rival the IMF is doomed to fail As a result of all this, and for the first time since joining the world economy, the Brics nations - Brazil, Russia, India, China, South Africa and their hangers-on - are in open rebellion. At a summit in Delhi yesterday, they determined in frustration to set up their own development bank, with an eventual view to creating an alternative to the IMF and lessening their dependence on the dollar as a reserve currency. They want their own institutions and their own voice. But how serious is this challenge to Western monetary hegemony? Outside endemic corruption, uncertain or wholly absent rule of law, and relatively low per capita income and life expectancy, there wouldn't appear to be much that unites this disparate collection of nations. But there are at least two things that do - high growth and trade. Ever more effectively, these countries trade with each other, and not with us. I don't want to exaggerate. Some 70 per cent of Chinese exports still went to advanced economies in 2010. But that share has fallen from 85 per cent little more than 10 years ago, and with other developing economies, the phenomenon is more marked still. Brazil has seen its advanced economy share fall from around 60 per cent to little more than 40, India from 65 to 45 per cent, and Korea from 65 to 40 per cent. China, with its immense appetite for imported natural resources, has been particularly aggressive in developing these new trade links, with a series of infrastructure-for-commodities swap deals in Africa and Latin America. Emerging markets seem fast to be developing their own, decoupled dynamic. The financial crisis has accelerated the divergence. In the past, a recession in the West would be felt twice as badly in the developing world, with its high dependence on exports of commodities and basic manufactured goods to the richer economies. But this time around, while the West has stagnated, output in the emerging economies has grown by more than a fifth and now accounts for more than 40 per cent of world GDP. The reversal in fortunes could scarcely be more dramatic. The two worlds seem to be changing places, with the West characterised by high levels of debt, unaffordable welfare and entitlement systems, poor training, decaying infrastructure, and a general air of despondency and decline. Its steady loss of competitiveness has been matched by a growing swagger and confidence in the East. Unsaddled by the gilded expectations of most Western populations, the outlook for many emerging economies seems bright. Yet none of this justifies the establishment of a separate monetary system. I've watched these meetings of Brics nations in action and I have to say they are not at all impressive. There is very little sense of common purpose and identity. Indeed, they make the European Union look like a paragon of calm and harmony. By day, they talk grandly of multilateral action to tip the playing field in favour of poorer nations, while by night they scheme shamelessly against each other, often in conjunction with their supposed economic oppressors in the West. There is virtually nothing that unites them other than resentment and suspicion of Western monopoly, some of it justified, some of it not. I wish them well with their new development bank, but when it comes to where the next dam is to be built, and who's going to build it, that's when the sparks will fly. The US's "exorbitant privilege" - dollar hegemony - is surely reaching the end of its natural life, yet the future cannot lie with two separate systems, one Western and one Eastern. A global economy requires global governance and global institutions. The solution lies in reform of the existing system, not the establishment of a rival one.