POWER AND PUBLIC BANKS

IN THE BRICS

Working Paper 27 de diciembre de 2014

Non-professional English version
 POWER AND PUBLIC BANKS IN THE BRICS

1. The BRICS countries are betting for a different

social and economic development model. This
alternative model is becoming more and more
incompatible with the Western dominant one. It
is not a mere ideological or conceptual opcion
and even less -as some simplistic interpretations
sometimes try to explain-, a personal
commitment of certain more or less charismatic
leaders.

2. Facing the oligarchic model imposed by the

central financial power on Europe and the United
States, the BRICS countries are promoting an
active defense of general interests through
models of intensive social and economic
development.

3. These development models are leveraged in key

structural supports, affecting both political and
economic power.

4. The key factors of the political power in the BRICS

countries are substantially different from one
country to another but have some essential
aspects in common. Among others, the limits of
the power of economic oligarchies on the media.

5. The backbone of the relationship between power

and economy in the BRICS countries is probably
based on limiting the power big private banks
have in the West and especially in Anglo-Saxon
countries. And also the leadership of public banks
 POWER AND PUBLIC BANKS IN THE BRICS

in the financial sector and, ultimately, on the

whole productive development.

% ASSETS PUBLIC BANKS /

TOTAL SECTOR 2012
93%
78%

60%
45%

CHINA INDIA RUSSIA BRAZIL

Source: The Economist / BIS / EKAI Center

6. As EKAI Center has been emphasizing, the

structural problem with large private banks is that
either they are controlled by the government or
the society, or they end themselves controlling
government and society, as in Anglo-Saxon
countries and much of Europe. Economic models
 POWER AND PUBLIC BANKS IN THE BRICS

dominated by big private banks are models in

which productive development gradually tends to
weaken and to be replaced by debt,
overconsumption and financialization of the
economy.

7. Although for some superficial Western theorists it

may seem strange, this hegemony of public banks
in the BRICS countries is not a temporary residue
of the past but, on the contrary, a conscious and
firm commitment to maintain the subordination
of economic powers to the general interest of the
country, as an essential tool to leverage models
of intensive socio-economic development.

8. Anglo-Saxon theorists, when defending private

banking, absurdly make use of the same
theoretical models applied to small industrial
enterprises in free competition conditions. In fact,
these models are useless for evaluating the
efficiency of large banks, whose activity and
profits are directly related to regulation and
public intervention. Or, more correctly to the
mutual influence between government and
banking sector.

9. As we know, public banking has a minimal

presence in Anglo-Saxon countries, or so it was
until the nationalization of failed banks after the
outbreak of the financial crisis. Quite different is
the situation in continental Europe where public
banks in the strict sense tend to absorb between
15% or 20% market share (with nearly 40% of
 POWER AND PUBLIC BANKS IN THE BRICS

savings banks and credit unions or cooperative

banks). In the core countries of the continent,
public banks are also a minority -about 20% of the
market- and the fundamental weight of the
banking sector remains in the hands of savings
banks, credit unions and cooperative banks (55%
in France and 60% in Germany).

10. The leadership of the big private banks in Anglo-

Saxon countries, savings banks and cooperative
banks in continental Europe, and public banks in
emerging countries probably explains much of
the structural differences between social and
economic models and between different
geopolitical positions, as it also explains why the
unstoppable advance of the BRICS is an
intolerable threat to the central financial power.

As a Working Paper, it does not reflect any institutional position or opinion neither
of EKAI Center, nor of its sponsors or supporting entities.
EKAI Center seeks to do business with companies or governments covered in its
reports. Readers should be aware that we may have a conflict of interest that could
affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision.
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