The BRICS Bank as Inverse Institutional Bypass, or "Christmas comes early for Mariana Prado, but did she get what she really wanted?"

So, as you may be aware, the BRICS nations – Brazil, Russia, India, China and South Africa – will be establishing their own developmental Bank, which is being called the BRICS Bank.  The motivation behind the BRICS Bank is a dissatisfaction with the way the World Bank is organized and run.  There are three principal sources of dissatisfaction.  The first is the degree to which World Bank governance is dominated by that Bank’s largest shareholder (and contributor of capital), the United States.  Relatedly, they are also dissatisfied by the WB’s lending policy, which focuses on neo-liberal private market development rather than on infrastructural development.  And finally, there is also dissatisfied with the WB’s use of conditionalities – i.e., with its frequent demands that recipient countries undertake neo-liberal governance reforms as a condition for getting a developmental loan.

As many may be aware, our own Mariana Prado has spent the last couple of years developing an innovative developmental strategy that she calls “institutional bypass”.  The basic gist of this strategy is that instead of focusing on reforming existing but problematic governance institutions, law and development could focus on developing functionally parallel institutions and having them compete with the existing institution.  She believes that the superior economic and social efficiencies that law and development strategies will bring to these parallel institutions will give them a competitive advantage over their older, corrupt counterparts, and that competition will thereby cause the new and better designed institution to ultimately end up replacing the older corrupt institutions.

I think it easy to see that the BRICS Bank is exactly of this kind of thing:  a new institution brought about to compete with an older and, at least to some, dissatisfactory institution. 

But there’s a twist:  because the BRICS Bank, in rejecting the use of conditionalities, it is effectively rejecting rather than promoting the general law and development agenda.  It is what we might call an 'inverse' institutional bypass -- a bypass that is challenging rather than promoting 'law-and-development', at least in its neo-institutionalism guise, as a developmental strategy.  

 Somewhat ironically, as a law and development skeptic, the reason why I really like Mariana's idea of institution bypass is precisely because it does not presume the superiority of law and development legal reforms:  by allowing for competition, it implicitly allows for the possibility that the seeming problematic institution could in fact be more efficient and effective than those advocated by law and development.  I don’t know if in developing her model, Mariana ever really considered this ‘ironic’ possibility.  But if she hasn't, now she may have to.