AIIB, BRICS and an Emerging World
EU USA China Russia Germany India Canada
BSSB.BE http://journal-neo.org 14.04.2015
Germany is a founding member as France. So is Luxemburg, even Great Britain. Putin’s Russia and India are also among the founders. To the surprise of many, so is the International Monetary Fund (IMF), an institution that until now has been a pillar of the dollar system. We are talking about China’s Asian Infrastructure Investment Bank or AIIB.
Beijing announced they will give $50 billion to start the new bank. At the time, Washington and most of the rest of the world ignored the bank, while the Obama Administration attacked the AIIB for possibly lacking transparency or sufficient concern for environmental risks, patent diversions from the reality, namely, that the AIIB represents a strategic threat to continued American global dollar hegemony.
Washington’s well-aimed shot in the foot
The Obama Administration, by fiercely opposing it when the UK, Australia, Japan and other core US allies indicated interest in joining the AIIB, now have royally shot themselves in both feet. Today, as of the March 31 deadline, more than 40 nations have joined with China’s new banks as Founding Members.
China, Russia, India, Brazil and other fast-emerging economies find it is manifestly absurd that today IMF voting rights on the Executive Board give France, with a $3 trillion GDP, far more votes than China with a 2014 GDP of more than three times that, at $10 trillion, or gives Belgium (1.86%) with a $500 billion GDP a larger voting share than Brazil (1.72%) with a GDP more than four times as large at $2.2 trillion.
According to the IMF bylaws, a member country’s voting shares ought to be roughly proportional to its relative size among the 147 IMF member countries in terms of GDP. When Washington drew up the IMF bylaws in 1944 it stipulated, conveniently, that no major decision of the IMF could come into force unless it had 85% of all member voting shares supporting it.
US foreign policy under Obama, as it was under George W. Bush, is being run by a gaggle of neo-conservative ideologues who seem incapable of flexible response. For them anything China does is “bad” and must be opposed with all US might.
The new architecture emerging
Not only are Russia, Brazil, India, in the AIIB founders list—four of the five BRICS—as well Australia, New Zealand, Indonesia, Pakistan, Philippines, Vietnam—countries the Obama Administration is relying on to join the military Asia Pivot against China, have all decided to join with China in her new bank. Even Taiwan has applied to join under the name Chinese Taipei.
“Money talks and nobody walks,” as the crazy radio jingle during the 1960’s aired by Rock ‘n Roll DJ Charlie Greer on the popular WABC Top 40 New York radio station, on behalf of Dennison’s Clothing Store put it. China has the money, and nobody, except the USA, is walking away from that it seems.
The rush to get in on the China-backed Asian Infrastructure Investment Bank by all these countries including the largest EU members is the realization that Asia and Eurasia is where the economic future of the planet will be made or broken.
The USA and Canadian economies are choking in unpayable debts, rotting infrastructure and rustbelt industrial ghost towns like Detroit or Pittsburgh. America is no longer the magnet that all others are drawn to for trade.
The country is bust, its government economic figures a bodyguard of lies, its true unemployment at Great Depression levels of 23.2% according to John Williams’ Shadow Government Statistics.
The infrastructure gap across Asia and Eurasia is enough to spur global industrial growth for decades. The Asian Development Bank (ADB) estimates Asia will need $8 trillion over the next decade for energy, transportation, telecommunication and water/sanitation.
Now private investment in infrastructure runs a mere $13 billion a year, most in low-risk projects. Official development assistance adds another $11 billion a year. That means a shortfall exceeding $700 billion a year.
By refusing to join and trying to stop the AIIB Washington in effect stands opposed to Asian regional investments that will expand trade, support financial market development and macroeconomic stability, and improve environmental, health and social conditions.
Instead all Washington has to offer is the silly Trans-Pacific Partnership for US-friendly free trade deals that would allow Monsanto and other US corporations to override Asian national laws in pursuit of profit.
And a new BRICS Bank
The Asian Infrastructure Investment Bank is but one new initiative by the world’s emerging economies.
Collectively, BRICS account for nearly $16 trillion in GDP and 40% of the world’s population, nothing to be lightly disregarded as a group of banana republics as some policymakers in Washington evidently still see them. They haven’t had their eyes checked since 1944 apparently.
The New Development Bank as it is formally called, or informally the BRICS Development Bank will be headquartered in Shanghai, China’s fast-emerging world financial hub. It will open for business with a $100 billion dollar liquidity reserve to defend against possible currency wars as Washington and Wall Street launched in 1997 to destroy the then-booming Asian Tiger economies led by South Korea, Malaysia and Indonesia.
The New Bank will also have an initial $50 billion in capital, each BRICS country contributing $10 billion, with the agreed option to rise to $100 billion for financing BRICS infrastructure projects.
The NDB charter specified its membership will be open to all United Nations member states. However, and this is crucial, the five founding BRICS capital share must never fall below 55 percent, and a non-founding member may never increase above 7 percent.
In short The BRICS bank will be managed by governments who share deep dissatisfaction with the Washington-controlled Bretton-Woods institutions.
The combination of the two new infrastructure banks poses the greatest threat to the US dollar system and its control of world financial flows since 1944.iv It is this threat that is driving the rudderless foreign policy agenda of Washington. Peace and cooperation is a far more useful way to resolve affairs among civilized nations.
- William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”.