GS Analyst: Daily Current Affairs

Global concerns arise over the dominance of western currencies in the global financial system, prompting discussions among developing nations like Brazil, Russia, India, China, and South Africa (BRICS) about alternative currencies.

Impact of Globalisation on Developing Nations:

• Financial Subsidisation: Developing nations argue that globalisation has led to the subsidisation of living standards in wealthy countries, as poorer nations finance the richest fifth of humanity by $660 billion annually.
• Wealth Transfer Mechanisms: Wealthy countries, acting as the world's bankers, exert control over global financial flows, draining resources from developing nations through debt servicing and market liberalisation.
• Economic Disparities: Developing countries forfeit a significant portion of their GDP annually, hindering investments in essential sectors like education, health, and the environment, while the gains primarily benefit industrialised nations.

Challenges and Alternatives in the Global Financial System:

• Geopolitical Concerns: Geopolitical tensions arise as nations question the dominance of the US dollar, especially considering its use as a tool for political sanctions and power projection.
• Displacement of Dollar Dominance: Nations exploring alternatives to the dollar face disruptive adjustments and challenges in building their economic resilience.
• Need for Sustainable Solutions: Economists propose solutions such as addressing climate debt through international lending mechanisms and revisiting historical proposals like those put forth by John Maynard Keynes at the Bretton Woods conference. 

Mains Question:

Discuss the implications of the dominance of western currencies in the global financial system on developing nations, and evaluate potential strategies to address financial disparities and promote equitable international cooperation.