Asian Infrastructure Investment Bank – a challenge to imperialist hegemony

“The Anglo-American dispute over membership of a new Beijing-led development bank is one of the early chapters in the growing competition between the US and China over who will write the rules for the 21st-century global economy.” So wrote Geoff Dyer in the Financial Times recently, and he is right. (Superpowers circle each other in contest to control Asia’s future, 14 March 2015)

The world is sick and tired of being bullied by imperialism, whose public face is the big banks and organisations such as the World Bank and the IMF. These banks, through their control of massive amounts of capital in money form are able to dictate terms to those who need to put capital to use.

Primarily, they ensure a flow of tribute to the imperialist countries to which these banks belong. Who gets loans and on what terms is controlled by imperialism. This has major repercussions on matters such as funding for basic services, emergency assistance, policy lending, and funding to conflict-affected states.

Any country that tries to break free from imperialism’s vassaldom is demonised, and subjected to financial bullying that is designed to inflict maximum pain on its citizens, who are then given every support to build up rebellion against the government. In the worst-case scenario, these countries are ultimately subjected to regime change through military invasion. This has been the case in Afghanistan, Iraq and Libya, and is currently being attempted in Syria.

In recent years, however, imperialism’s stranglehold over the world economy has gradually been weakened, thanks in no small part to the growth of Chinese economic power, as well as the power of its partners in BRICS, the grouping of Brazil, Russia, India, China and South Africa.

China’s stratospheric economic growth has enabled it to offer itself as a fair price purchaser of commodities from countries that previously had no choice but to sell cheap to imperialist cartels. Many countries of Africa and Latin America in particular have been able to improve their economic performance substantially as a result.

However, imperialism continues to exercise disproportionate leverage through its monopoly of the world’s financial institutions, forcing those indebted to them to dance to its tune. Poor countries with large IMF loans are regularly forced to minimise their trade with China and Russia, for instance, and to vote in accordance with imperialism’s directions in international institutions such as the United Nations. They are also bullied into failing to intervene in any meaningful way to prevent or oppose – and sometimes even pushed into joining – imperialism’s predatory military adventures.

Imperialist domination of international institutions

This imperialist exercise of monopolist control is manifestly contrary to the interests of the newly-developing countries of Brics, to say nothing of the oppressed countries as a whole. The Brics countries have sought repeatedly to increase their say in the decisions of the IMF and World Bank, and China in the Asian Development Bank – in line with their new economic power (together they comprise over 20 percent of the world economy, but their voting rights within the IMF for instance are restricted to under 11 percent).

“The Brics nations, which account for more than a fifth of global output, have just 10.3 percent of quota. European countries, by contrast, are allocated 27.5 percent for just 18 percent of output. To add insult to injury, the IMF presidency is reserved for a European, while that of the World Bank routinely goes to an American.” (The Brics Bank is a glimpse of the future’ by David Pilling, Financial Times, 31 July 2014)

The position is very aptly illustrated by the graphic which can be seen here Unfair allocation, taken from the same article.

Efforts to rectify the situation have been to no avail. Both in 2008 and in 2010, the IMF even recognised the inequity of its voting share arrangements and passed a resolution amending its system of quota allocation in order to transfer a six percent increase in voting to newer entrants. But the IMF was set up with a US veto (a right not accorded to any other member), and the US has exercised this veto to prevent the IMF resolution being implemented.

Thus it is that the world’s financial institutions continue to be controlled by US imperialism – in partnership with European or Japanese imperialism, as the case may be. As a result, China, the other Brics countries and their allies have had no option but to seek to set up parallel financial institutions where their voice can be as loud as their investment is large.

Countermeasures

Initiatives have been coming in a fast and furious manner. Last year saw the establishment of the New Development Bank by the BRICS countries, which other countries needing development funding will be able to join, though the Brics have given themselves a permanent controlling interest.

Alongside the Bank, the Contingent Reserve Arrangement has been set up which will have the function of protecting its contributors against financial shocks, such as might be incurred, for example, by a speculative attack on their currency. Those having recourse to the reserve would not be subject to imperialism’s conditions – although one imagines that the reserve may have conditions of its own to impose that might occasionally run counter to imperialism’s interests!

For the future, China and its allies have in mind the setting up of a Development Bank of the Shanghai Co-operation Organisation (SCO), a six-country Eurasian political, economic and military grouping in which China and Russia play the main role. (A number of other countries are expected to become full SCO members in the future, not least from the five observer members, which include India, Pakistan and Iran.)

Moreover, efforts to break the financial domination of imperialism have not been confined to setting up financial institutions, as the blogger Wealth Watchman recently pointed out.

“In the past 10 years, the Brics, led by President Putin and Chinese Premiers, have moved to edge out the western banks in the many areas in which they had leverage. From putting the kibosh on the petro-dollar arrangement [Russia and China have been at the forefront of a movement away from using the dollar to settle payments for oil], to sucking out as much gold tonnage as possible from the Banking Dragon in the City, to securing their own lines of credit and finance, to establishing their own credit rating agencies, to even building their own alternate, worldwide internet cables.” (The rats are pouring out of DC’s sinking ship, Wealth Watchman, 18 March 2015)

The project that is presently making the most headlines, however, is the setting up the Asian Infrastructure Investment Bank (AIIB), which is specifically aimed at financing infrastructure projects throughout Asia. The AIIB is perceived as being set up in opposition to the Asian Development Bank (ADB, controlled by the US and Japan).

In the ADB, China has voting rights amounting to 5.5 percent as compared to Japan’s 15.7 percent and the US’s 15.6 percent, even though China is the second-biggest world economy after the US. Theoretically, setting up an additional development bank should cause no problems, for, according to the World Bank itself, developing countries require between them some $1tn in infrastructure development, which could only be financed to the tune of 40 percent by existing multilateral development banks.

Where the US sees itself under threat, however, is that in losing its effective monopoly control of infrastructure lending, it also loses its power to blackmail recipients. Equally disastrously, China, for example, has many highly-competent construction companies anxious to secure infrastructure building contracts – as indeed do the imperialist countries. But when the loans come from a source that is strongly influenced by China, it is only to be expected that the contracts will tend to travel in an easterly rather than a westerly direction.

All of which has the added advantage for the recipient countries that their infrastructure will actually get built, rather than them finding that all the money they have borrowed has been paid out in fees to western ‘consultants’.

As a result, US imperialism has been lobbying hard for its allies not to join the AIIB, which cannot but undermine its own power and influence. The deadline to acquire the status of a founder member was 31 March this year. So imagine the consternation in US imperialist circles when, on 12 March, Britain, in pursuit of its own imperialist interests, applied to join (the first G7 country to do so), followed very quickly thereafter by France, Italy and Germany!

Wealth Watchman was moved to comment: “So much for the ‘special relationship’ between the Rothschild and Rockefeller dynasties! It just goes to show that when it’s all on the line, and it’s down to survival (and any semblance of any relevance whatsoever), they’re all just scorpions in a bottle, waiting to turn on one another.”

The Obama administration immediately delivered a public rebuke to its British partner in crime, to the effect that Britain was guilty of “constant China accommodation” – clearly implying that this was akin to British imperialism’s 1930s policies of appeasement of Nazi Germany!

Amusingly, “the US Treasury said on Monday night that it recognised the need for greater infrastructure investment around the world. However, it said any new institution should ‘incorporate the high standards that the international community has collectively built’, and that new members of the AIIB should ‘push for the adoption of these same high standards’.” (Europeans defy US to join China-led development bank by George Parker, Anne-Sylvaine Chassany and Geoff Dyer, Financial Times, 17 March 2015)

Since these ‘high standards’ included the lending of billions to such kleptocrat imperialist stooges as Mobutu of the Congo and Marcos of the Philippines, it is obvious that it will be a real struggle for the AIIB to reach these heights. Actually, the only ‘standard’ is to serve imperialist interests, and that ‘standard’ will certainly be diluted in the AIIB, despite the host of imperialist European countries now rushing to join. The point is that their influence will be limited to the level of their financial commitment only, and on that they will be in the minority.

The move to war

Of course, imperialism under threat is dangerous indeed, as it will fight with utmost brutality and with every bit of its considerable means to maintain its imperialist domination. Some very pertinent points on this aspect of the question have been made by the Financial Times’ Gideon Rachman:

“The big question is whether America’s military muscle will ultimately matter more than China’s economic might.” Note that Mr Rachman doesn’t doubt for a minute that US imperialism will, if it deems it necessary, resort to war to preserve its predatory interests. He continues:

“The AIIB episode demonstrates that, in the struggle for influence in Asia, China’s strongest card is its growing economic power. America’s strongest card, by contrast, is its military might and its network of security treaties. The countries caught in between face a dilemma. Japan, Australia, the Philippines and south Korea all have security treaties with the US. But every one of them now does considerably more trade with China than the US.

“South Korea, for example, relies on American power to ward off north Korea and perhaps, one day, as a hedge against China itself. But China now takes more than a quarter of south Korean exports compared with about 12 percent that go to America.

“As a result, the south Koreans are frequently pulled in two directions. The AIIB is one example. Another is a fierce debate in the country about whether to accede to a US request to install an anti-missile system that might be useful defending against the North — but which the Chinese see as a threat to their own security.” (‘China’s money magnet pulls in US allies’, 17 March 2015)

With a view to preventing China and its allies from building their strength to the point of being able finally to put an end to imperialist hegemony, US imperialism and its allies have certainly not been sitting on their hands. Any number of opposition movements have been financed throughout the world to bring about the overthrow of governments perceived as getting too close to the anti-imperialist opposition.

Today, the Venezuelan government is in the crosshairs – China has invested nearly $60bn there, with a further $10bn reportedly pledged at the end of March, which is largely being repaid in oil (about 60 percent of output). So now Venezuela has just been declared an unusual and extraordinary threat to US national security – no less – by the Obama administration!

The sanctions against Russia are designed to serve the same purpose. Sergei Glazyev, Putin’s chief economic adviser, has specifically stated that the reason for the US supporting and financing the Ukrainian fascists is to provoke an intervention by Russian military forces, for “Russian intervention into a sovereign nation gives the US and Nato allies (the) right to impose financial sanctions and write-¬off American commitments to Russian entities, which Glazyev estimates are in the several hundred billion dollar range.