(The BRICS development bank is capitalizing further as well; perhaps a multipolar world.) Good. (This is longish, but it’s not a short subject.)
A few key highlights:
“The World Bank, under U.S. congressional pressure, has said, look, we’re not going to finance countries becoming independent of the United States; our function is to make them export more to the United States and to buy from the United States. So the funding of the World Bank has mainly been to fund infrastructure developments, vastly overpriced, to Third World countries to create money for American engineering firms; also to lend out dollars and to indebt countries to it; and worst of all, to promote privatization. And that’s really the big difference between the Chinese Development Bank’s philosophy and the World Bank.
The World Bank is pressured everywhere for privatization of public utilities, of basic infrastructure, and then it will make loans to the governments to develop this infrastructure or the roads and the external economies, and then sell them cheap to American buyers, who essentially will create monopolies and turn infrastructure into a rent extraction to squeeze out interest, dividends, management fees that are all going to be paid to the Americans. And this has been raising the price of basic utilities–communications, transportation, water, and other things throughout the Third World. And this has made these economies uncompetitive with the United States that has a mixed economy where the government subsidizes infrastructure. So the Chinese Development Bank is to help make other countries get independent of this sort of neocon, neoliberal, right-wing economic philosophy and work government-to-government, help governments develop infrastructure, so that they can provide basic services at a lower cost or a subsidized cost, or even freely to the populations. That’s how the European countries and American economy got rich. And the only way to help repeat this process is to make a clean break from the United States and the World Bank.
“Now, what China gains by having them as members is the fact that now that this is a multilateral supranational organization, it will be very hard for countries that borrow from the bank to undertake their own development projects to then write down the loans. They can’t treat this bank in the way that they would treat private bondholders. This bank will be treated in the same way that the IMF or the World Bank or the European Central Bank is. Its loans will be immune from the haircuts and the write-downs that you’re having elsewhere. So this is China’s way–by bringing in the European countries, this is China’s way of protecting its own investments and its own loans to these countries without really risking a chance that England can play the role of a wrecker, which, of course, is what the United States would like it to do and why the United States pushed it into the common market originally.
PERIES: And, Michael, this also puts the whole issue of the U.S. dollar as a universal currency in question. Obviously, the Chinese are also interested in making sure the yuan/renminbi is also a part of these, part of what benefits from this relationship with these countries.
HUDSON: Well, the U.S. is using the dollar as a Cold War weapon. As I mentioned in the previous section, it’s been urging countries that owe money to Russia not to pay. [incompr.] Russia, the Ukraine, to treat the Russian debt as if it were foreign aid and didn’t have to be repaid, and as if somehow it were an odious debt. That was proposed by the U.S. banking interests.
China, if it can succeed with the other BRICS, with Russia, Brazil, and other countries, in creating an alternative area, it can turn the tables on the U.S. It can say, the debts to the World Bank are odious debts. They claimed to be foreign aid. They were counted in the United States budget as foreign aid. But they weren’t aid at all. They underdeveloped the countries. They made them import-dependent. They blocked their ability to produce their own food. So if China and the BRICS can achieve a critical mass as an alternative to the dollar, they can then treat the dollar in the way and that the U.S. financial strategists have been trying to treat it against any potential Cold War enemy, which means any country north of Maine, any country west of California, any country east of Rhode Island or south of Texas. The United States has turned the finance system, the dollarized system, into a Cold War tool, and other countries are moving as quick as they can, are being driven to move as quick as they can out of the U.S. orbit to protect themselves from being stiffed by the U.S. and to be free of U.S. financial aggression, in which the World Bank, is even more than the IMF, the most aggressive neoliberal, neocon institution.”
And what are the reactions from the World Bank and IMF?
File under: ‘We’re not scared of the Big Bad Wolf!’: ‘ADB, IMF, World Bank To Cooperate With China-Led Asian Infrastructure Investment Bank, Leaders Say’, at the Ibtimes.com
“ADB President Takehiko Nakao and China’s Finance Minister Lou Jiwei have conducted discussions about possible cooperation between the two regional lenders, they said at a China Development Forum 2015 session in Beijing, Reuters reported. At the same event, IMF Managing Director Christine Lagarde said her fund would be “delighted” to work with the AIIB, as there was “massive” room for cooperation on infrastructure financing in the Asia-Pacific region.
A similar message came from World Bank Managing Director Sri Mulyani Indrawati.
A ‘ha ha!’ from the Guardian:
“A growing number of close allies were ignoring Washington’s pressure to stay out of the institution, the Financial Times reported, in a setback for US foreign policy.
In China the state-owned Xinhua news agency said South Korea, Switzerland and Luxembourg were also considering joining.
The Financial Times, quoting European officials, said the decision by the four countries to become members of the AIIB was a blow for Washington, which has questioned if the new bank will have high standards of governance and environmental and social safeguards.
Japan, China’s main regional rival, has the biggest shareholding in the Asian Development Bank (ADB) along with the United States, and the Manila-based bank is headed by a Japanese, by convention.
Japan is unlikely to join the China-backed bank but the head of the ADB, Takehiko Nakao, told the Nikkei Asian Review that the two institutions were in discussions and could co-operate.”
Four days later via the Guardian:
“At least eight more countries may join the lender by the 31 March deadline, Jin Liqun, secretary general of the interim secretariat that is establishing the AIIB, told a panel at the conference on Sunday.
The fund will have approval from its shareholders at the start to double its capitalisation to $100bn, he said.
“China will follow the rules of the international community and will not bully other members but work together with them and try to reach consensus in all the decisions we make without brandishing the majority shareholder status,” he said.
Pepé Escobar has a wider angle take on all of it, some of it a bit past my historical knowledge (and no: he didn’t say ‘China’s wet dream’), and remember that China’s economy is largely State Capitalism. After referencing ancient Chinese symbols, ideograms, multiple Silk Roads (both by land and by sea), the newest dream pivoting to Eurasia; and US reactions to Xi Jinping’s framing it as a “geopolitical, ‘peaceful development”, “win-win” answer to the Obama administration’s Pentagon-driven pivoting to Asia “, comes:
“Beijing has been quick to dismiss any notions of hegemony. It maintains this is no Marshall Plan. It’s undeniable that the Marshall Plan “covered only Western nations and excluded all countries and regions the West thought were ideologically close to the Soviet Union”. China, on the other hand, is focused on integrating “emerging economies” into a vast, pan-Eurasian trade/commerce network.”
Along with mentions of an array of financial networking, trade and development deals in Eurasia and among the BRICS nations, Escobar references the “Russia-China financed $280 billion high-speed rail upgrade of the Trans-Siberian railway, and posits that “this is where the New Silk Road project and President Putin’s initial idea of a huge trade emporium from Lisbon to Vladivostok actually merge.”
One qualifier he gives is this, and sadly, I know almost nothing about it, but as he advises, we must keep our eyes peeled for developments:
“It can be argued that the success of the entire Silk Road hinges on how Beijing will handle restive, Uyghur-populated Xinjiang – which should be seen as one of key nodes of Eurasia. This is a subplot – fraught with insecurity, to say the least – that should be followed in detail for the rest of the decade. What’s certain is that most of Asia will feel the tremendous pull of China’s Eurasian drive.
And Eurasia – contrary to perennial Brzezinski wishful thinking – will likely take the form of a geopolitical challenge: A de facto China-Russia strategic partnership that manifests itself in various facets of the New Silk Road that also bolsters the strength of the Shanghai Cooperation Organization (SCO).”
He posits with a few ‘given this, given that’s’ that there will be an SCO alignment that unites at least 60% of Eurasia, with a population of 3.5 billion people and a wealth of oil and gas that more than matches the Gulf Cooperation Council states. The BRICS began a development bank last summer, and it’s now capitalized at $100 billion, as well.
Yes, a bipolar, or perhaps multipolar world is likely comin’ down the road.
He links to a great read by Peter Lee on whether or not this is “the twilight of Chinese Party” as key ‘experts’ argue (with hand-rubbing glee); not that he’s a fan of the PRC. Toward the end of the piece he gets to this stellar belief of his:
“Because…so I guess I should offer my views on The Future of the CCP after all. It’s actually pretty simple.
In my opinion, the world is run by jerks in suits. When regime change occurs, the new nation is still run by jerks in suits. The PRC will be no exception.”
But back to China’s Dreams: a major piece of infrastructure to facilitate these dreams is afoot:
‘China’s international payments system ready, could launch by end-2015’ – sources’; a Reuters exclusive!!!/s
“The launch of the China International Payment System (CIPS) will remove one of the biggest hurdles to internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.
It will also put the yuan on a more even footing with other major global currencies like the U.S. dollar, as CIPS is expected to use the same messaging format as other international payment systems, making transactions smoother.
CIPS, which would be a worldwide payments superhighway for the yuan CHN= CNY=CFXS, will replace a patchwork of existing networks that make processing renminbi payments a more cumbersome process.”
Yves Smith (Naked Capitalism) offers this caution:
“The sudden rush of countries joining China’s infrastructure bank, including supposed US allies like the UK, Germany, and France, demonstrates the desire of not just emerging but also advanced economies to have access to international institutions that are not dominated by the US. Whether the infrastructure bank actually winds up being better, as opposed to simply different than existing institutions remains to be seen. But as Hudson describes, the World Bank sets a low bar.”
I’ll end with Pepé’s opening:
“…it is imperative that no Eurasian challenger (to the U.S.)
emerges capable of dominating Eurasia
and thus also of challenging America”
~ Zbigniew Brzezinski, The Grand Chessboard, 1997
Take that, Zbig!
Coming soon: How will The Empire Strike Back? Stay tuned, as they say.