The recent creation of the Asian Infrastructure Investment Bank (AIIB) is a deliberate effort by China to tackle poverty head on. Some have argued that China is reinventing the wheel because a global bank that addresses the needs of the world is already in place. However, the old financial institutions have not given attention to the specific needs of infrastructural development.
China, it seems, has chosen the route of multilateralism as opposed to unilateralism which has been the longstanding approach of the United States of America. America, as the world’s richest country, has greatly benefited in the existence of the Brent Woods Institutions which are the World Bank and the International Monetary Fund. They called the shots and everyone else obliged. But from the look of things it seems the long honeymoon is over.
It has become very apparent that the current existing world finance system has failed most of the world’s poor countries. Instead of pulling these countries out of the mud of poverty, they have instead made matters worse. I have said in the past and will continue to say it; that the existence of the rich is very much dependant on the availability of the poor. The wider the gap between the rich and the poor, the more comfortable and secure the rich will remain. So in other words the rich are sustained by the poor. This analogy does not only apply to individuals, it also fits well in the ways that countries relate and treat each other.
The World Bank was formed right after the closer of the Second World War. The primary focus of this international bank was to address the poverty levels in continental Europe. This is was the result of the Marshal plan, a European rebuilding exercise named after the US Treasury Secretary, Richard Marshal.
The West African countries that have been plagued by the Ebola scourge have requested the international community for a similar treatment, that is a Marshal plan, and they have been met with quite deafening silence. For the time they remained under the Ebola attack, their economies literally came to a standstill. Trading came to a halt, imports and exports were diminished to almost zero. And for this, their poverty levels have grown gigantically.
African countries have had very slow going economies in general. Most of the blame would, of course, fall squarely on the lap of African leaders where dictatorship has been the order of the day. Besides this, the most crippling effect of the economies of Africa has been the World Bank’s structural adjustment policies (SAPs). Dictatorships and SAPs have been a deadly cocktail to say the least. SAPs which are supposed to adjust the way the economy functions with a clear mandate of making it better. But in the case of Africa, the situation developed from bad to worse.
According to the United Nations’ history of poverty datum line, Africa was economically better performing than Asia at the commencement of the 1960’s. This included China. This was the time when every country was eager to attain independence. SAPs have only served to enrich dictators as well as bringing huge financial return. In short, SAPs are generally responsible for the poverty levels in Africa.
Certainly China has a role in fighting Africa’s growing poverty which has literally been created by us and the western financial institutions. Africa’s lack of infrastructure development has had a direct bearing in the current levels of poverty. A good example of that is the arrival of the cell phone. The development of this infrastructure has improved all other areas such as health care as in telemedicine.
Currently, Africa’s agricultural products do not fetch their actual value and in most cases they do not reach their intended markets on time because of poor infrastructure. Agricultural products are generally perishables. In a situation where there are good roads and sea ports, the turnaround time will become even shorter and that will have a direct trickledown effect on the small farmer down in a remote rural corner. A good example of this is the way the cocoa business is conducted. Most cocoa farmers are not even aware of what the end product of their produce is. The cocoa is sold in its rawest form because there is no infrastructure to process it to a finished stage or at least semi processed.
According to information sourced from the World Bank, the world over, between a trillion to a trillion and a half US dollars are needed for infrastructure development and most of this is needed in Asia. In this case the clientele for this bank will not come in short supply. There is already a very large customer base for the business. How this bank is going to be financed should not cause anyone sleepless nights because already China has disbursed billions of dollars in loans to industrialised countries through other avenues of lending.
The United States must learn to live with the new bank which is China’s initiative. It is without doubt that China is a growing superpower and their superiority touches all aspects of life. They have a growing economy, a growing military and they are expanding in almost all other aspects of life. The fall of communism in 1991 gave the US a false sense of security and complacency and it seems this has caught them napping.
Allow me to do a short synopsis of this new financial institution. The bank has already attracted fifty entrants and it seems more are still salivating on the sidelines. What is most interesting though is the fact that several European Union members have joined. Key among them is Britain and France.
The existence of the new bank will certainly draw in other unintended consequences. The membership of the new bank transcends existing security structures and boundaries. Looking very carefully, the International Monetary Fund and the World Bank were initially tailor made to suit the needs of those member countries within the confines of the North Atlantic Treaty Organisation (NATO). The US seems to be alone on the sidelines as the country has failed to persuade its allies within NATO to abstain from the new investment bank.
The world’s two most important figures in the financial sector seem to have given a nod to the emergence of this new financial institution. The US Treasury Secretary Jack Lew and the current World Bank President Jim Yong Kim have clearly supported China’s initiative. Kim has already pledged his support and cooperation with the new financial institution. He said; “I’ll work with AIIB.”For the World Bank President to make such utterances, it surely means he has gone against the very policies of the man who appointed him, and that is President Barak Obama.
*Richard Moleofe is a
Retired Military Officer