Forecasts that new development banks sponsored by the largest developing countries are destined to erode the economic dominance of the United States are quite premature, but it is nonetheless no contradiction that the global hegemon has vigorously sought to stop them. More than a little hypocrisy is at work here.
The newly created Chinese-led Asian Infrastructure Investment Bank has drawn much more of Washington’s ire than has the BRICS New Development Bank formed by the five “BRICS” countries of China, Russia, India, China and South Africa. The U.S. government has leaned heavily on Australia and other countries sufficiently firmly that Canberra has declined to join the Asian Infrastructure Investment Bank despite its initial interest, nor have Indonesia and South Korea.
Although the infrastructure bank is to be capitalized with US$100 billion, it would be ridiculous to say that the World Bank or International Monetary Fund will be put out of business. It will not necessarily go much beyond complementing the existing Asian Development Bank, a regional multi-lateral institution controlled by the U.S. and Japan. And even the World Bank says Asia will require trillions of dollars to build its infrastructure in coming years that it and existing institutions can’t supply.
The politics of imperialism are at work here. The very idea that a country outside the control of the U.S. dares to set up an institution outside the control of the U.S. is an example that Washington, as the ultimate enforcer of multi-national corporations’ prerogatives, is determined to stamp out.
In a front-page article, The New York Times reported:
“American officials have lobbied against the [infrastructure] bank with unexpected determination and engaged in a vigorous campaign to persuade important allies to shun the project, according to senior United States officials and representatives of other governments involved.”
And what excuse does the U.S. government give for its opposition? Officially, the Obama administration is not talking, but, quoting a “senior official” granted anonymity, the Times reports:
“A senior Obama administration official said the Treasury Department had concluded that the new bank would fail to meet environmental standards, procurement requirements and other safeguards adopted by the World Bank and the Asian Development Bank, including protections intended to prevent the forced removal of vulnerable populations from their lands. … ‘How would the Asian Infrastructure Investment Bank be structured so that it doesn’t undercut the standards with a race to the bottom?’ asked the senior official.”
Has the Obama administration, or, more accurately, the government apparatus that has steered U.S. policy on behalf of corporate interests for generations, suddenly grown a conscience? Quite unlikely. The World Bank and International Monetary Fund, as well as regional banks such as the Asian Development Bank, have been under U.S. suzerainty since their founding. Does the World Bank really uphold development ideals? The record firmly says otherwise.
The World Bank’s record of destruction
The World Development Movement, a coalition of local campaign groups in Britain, reports that the World Bank has provided more than US$6.7 billion in grants to projects that are destructive to the environment and undermine human rights, a total likely conservative. To cite merely three of the many examples, the World Bank:
- Loaned an energy company in India more than $550 million to finance the construction of two coal-fired power plants. Local people, excluded from discussions, were beaten, their homes bulldozed and complain of reduced food security and deteriorating health as a result of the power stations.
- An Indonesian dam, made possible by the World Bank’s $156 million loan, resulted in the forcible evictions of some 24,000 villagers, who were subject to a campaign of violence and intimidation.
- In Laos, a hydropower project made possible by World Bank guarantees displaced at least 6,000 Indigenous people and disrupted the livelihoods of around 120,000 people living downstream of the dam who can no longer depend on the rivers for fish, drinking water and agriculture.
A study of World Bank policies, Foreclosing the Future by environmental lawyer Bruce Rich, found that:
“Drawing on Bank studies, project evaluations and sectoral reviews, it is shown that the World Bank still suffers from a pervasive ‘loan approval culture’ driven by a perverse incentive system that pressures staff and managers to make large loans to governments and corporations without adequate attention to environmental, governance and social issues. In 2013, Bank Staff who highlight social risks and seek to slow down project processing still risk ‘career suicide.’ … [The bank] has continued to binge on enormous loans to oil and gas extraction, coal-fired power stations and large-scale mining generating environmental damage, forest loss and massive carbon emissions.”
A study prepared by the Institute for Policy Studies and four other organizations found that World Bank lending for coal, oil and gas was $3 billion in 2008 — a sixfold increase from 2004. In the same year, only $476 million went toward renewable energy sources.
It could be pointed out that China’s industrialization has had serious environmental consequences, and that Chinese money was critical to the building of the Three Gorges Dam, the construction of which led to the forced removal of at least 1.3 million people. True enough, but Canadian, French, German, Swiss, Swedish and Brazilian capital were also necessary to build the dam. The World Bank also provided loans associated with Three Gorges and provided experts during the project’s planning stages.
Despite the pressure from Washington, 21 countries signed up to be founding members of China’s Asian Infrastructure Investment Bank, including India, Singapore and the Philippines.
BRICS bank expected to bow to the logic of capital
China’s new bank was formed three months after the BRICS New Development Bank. The BRICS bank will be more modest, with a goal of US$100 billion capitalization, spread equally among the five countries. In a July 2014 communiqué, the five countries said their bank will have the “purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies.” They also pledged to organize a “BRICS Contingent Reserve Arrangement” to “help countries forestall short-term liquidity pressures” resulting from foreign-exchange or debt markets.
Although this bank is intended as a gesture of independence from the U.S.-dominated world financial system, and will use some combination of the BRICS currencies, detaching from the world system is not a simple matter of setting up new institutions. A New Delhi economics professor, C.P. Chandrasekhar, sees the bank being limited in what it can potentially do. Writing on Naked Capitalism, he said:
“However, the new development bank is fundamentally not detached from the global financial system. Being a bank, even if a specialised one, it must ensure its own commercial viability. And it must do so when a large part of the resources it lends would be mobilised from the market. … [W]anting to be seen as respectful of the sovereign interests of borrowing countries, the [New Development Bank] would be careful not to frame its lending rules in ways that threaten the policy sovereignty of borrowing countries. If the countries that approach the institution are pursuing neoliberal strategies, there may be clear limits in terms of what the new development bank itself can achieve.”
Professor Chandrasekhar concludes:
“The decision of the BRICS to set up mini-versions of the World Bank and the IMF seems to be more a symbolic declaration of resentment at the failure of the US and its European allies to give emerging countries a greater say in the operations of the Bretton Woods institutions. … The desire to redress the obvious inequities in the global financial system seems far less important.”
If it is a safe haven, it is not going away
That, for at least the near future, U.S. hegemony is not threatened received fresh confirmation during October’s week-long decline in the world’s stock markets — money from around the world quickly poured into U.S. treasuries as a safe haven. From a capitalist standpoint, doing so is entirely rational: If the U.S. government unravels, the entire global capitalist system disintegrates.
Although predictions of the U.S. eventually being dethroned will one day come true — every empire has an expiration date — that such a dethronement is imminent is wishful thinking. This is not to say that U.S. power is not eroding, but there is no conceivable replacement for the U.S. at the center of the world capitalist system. The U.S. spends about as much money on its military as every other country on Earth combined and the dollar remains the world’s reserve currency; that the world continues to buy U.S. debt as a safe haven enables the U.S. to continue to run up deficits and finance its military.
There is no military remotely in a position to become the global enforcer of capital, nor any currency that could replace the dollar at the present time. The euro is not a candidate because the eurozone is too fractured and unstable; the renminbi is not fully convertible. According to the Bank of International Settlements, the U.S. dollar was involved in 87 percent of the world’s foreign-exchange transactions in April 2013, while the euro was involved in 33 percent and the renminbi in 2 percent.
The U.S. needs China to buy its debt but China needs the U.S. as an export destination; Chinese growth continues to be dependent on unsustainable levels of investment rather than internal consumption, a situation difficult to adjust because production is moved to China to take advantage of its low sweatshop wages. A contradiction on the other side of the Pacific is that U.S. foreign policy treats China as a capitalist competitor that must be contained at the same time that U.S.-based multi-national corporations are instrumental in transferring production to China.
A change in the global hegemon from the U.S. to another country or bloc, leaving the capitalist system intact, provides no salvation, no more than did the early 20th century’s transfer from Britain. Another world is possible only with an entirely new economic system. Otherwise, the subaltern will remain subaltern, be they nation or people.