Economics

Asijský multilateralismus

Apr 13, 2015 Joseph E. Stiglitz

NEW YORK – Mezinárodní měnový fond a Světová banka se chystají na svá výroční zasedání, ale k velké novince v globální ekonomické správě v nadcházejících dnech ve Washingtonu nedojde. Takovou novinku jsme zaznamenali už minulý měsíc, když se Velká Británie, Německo, Francie a Itálie připojily k více než 30 dalším zemím jako zakládající členové Asijské infrastrukturní investiční banky (AIIB). Ta, iniciována Čínou a vybavena 50 miliardami dolarů, pomůže splnit obří infrastrukturní potřeby Asie, výrazně přesahující kapacity dnešních institucionálních opatření k financování rozvoje.

Člověk by si myslel, že spuštění AIIB a rozhodnutí tolika vlád ji podpořit bude důvodem k všeobecné oslavě. Pro MMF, Světovou banku a mnohé další tomu tak skutečně bylo. Rozhodnutí bohatých evropských zemí zapojit se však zcela nepochopitelně vyvolalo hněv amerických představitelů. Jistý nejmenovaný americký zdroj dokonce obvinil Británii z „neustálého vycházení vstříc“ Číně. Skrytě Spojené státy vyvíjejí tlak na země po celém světě, aby se držely stranou.

Americký odpor vůči AIIB není v souladu s jejími deklarovanými ekonomickými prioritami v Asii. Žel zdá se, že se jedná o další případ, kdy nad idealistickou rétorikou trumfuje nejistota Ameriky ohledně jejího globálního vlivu – a tentokrát možná podrývá významnou příležitost k posílení asijských rozvíjejících se ekonomik.

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Joseph E. Stiglitz

Writing for PS since 2001
321 Commentaries

Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is a former chief economist of the World Bank (1997-2000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation and was lead author of the 1995 IPCC Climate Assessment.

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0 Comments on this paragraph, 16 Comments on this article

daniel Fernández Jiménez Apr 17, 2015

Too early or too late for it?
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Юрий Железняк Apr 17, 2015

"However, the opposition in the US AIIB difficult to understand" - is easy to understand, given that government in the United States is ideocratic regime.
Ideocracy, which is the idea of exclusivity, and indispensability. Primeval sounds, wildly, but it is, unfortunately, so ...
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Michael Holt Apr 16, 2015

Why would anyone favor increased Chinese Communist Party control over financial institutions of any kind, much less a global development bank, other than an academic economist whose judgment is clouded by an ideology that favors centralized government control in general at the expense of the billions of freedom loving people who rely on free markets to maintain their individual liberties?

China's own banking system is largely undeveloped and is largely controlled by the Chinese Communist Party. By incurring massive amounts of debt to fund highly visible infrastructure projects, they have showcased China's engineering talent, but what many fail to see is that there is not enough revenue to cover even the interest on the debt, and this has resulted in questionable loans on a massive scale.

Financial contagion emanating from a financial crisis in China may be deterred if China does what it has done in the past to conceal the weaknesses in its banking system, namely to sell the bad loans and uncollectable accounts receivable to "Asset Management Companies" in exchange for notes receivable from these AMC's that can then be held on the books of the banks and privileged Communist controlled corporations at face value provided that interest payments are met. The AMC's have been able to do this by liquidating the underlying assets at pennies on the dollar, which means that little if any of the Note principal will ever be repaid. But, by repeating this process, as they are about to do again, these bad loans can be concealed for a very long time. Still, this is hardly an endorsement for the CCP as a candidate to control a global, or even regional, infrastructure development bank.

True, the new leadership of the CCP recognizes the unsustainability of China's rapid accumulation of bad debt to finance white elephant projects and additional excess capacity in certain industries where existing capacity within China alone is already far in excess of 100% of global demand, and it has taken measures to curtail this out of control spending. But, this has still resulted in trade contagion from China that has negatively impacted other countries, possibly leading to financial crises in those countries.

This is of especial concern to heavily indebted countries with aging populations that are now starved for growth in order to prevent their debt to GDP ratios from spiraling even further. Many of these countries have sought to achieve their much needed economic growth by turning to China, which helps to explain why China has become the world's largest trading partner and the world's largest creditor. But, ironically, one of the reasons these countries are starved for growth is because their corporations operating in the strategically important industries over which the CCP China has been aggressively seeking global dominance have been unable to compete with China's communist controlled corporations that benefit from massive subsidies and technology transfers through government backed cyber theft and/or local content requirements applied to MNC's seeking to do business in China--possibly to ensure access to critical rare earth based components that China has already restricted for geopolitical purposes.

To put this into perspective, consider that many Chinese companies intentionally operate unprofitably because this is what ensures that they will remain cash flow positive: they will qualify for government subsidies only if they reach the targeted levels of employment that the Communist party relies upon to ensure its stranglehold on power. And, China's lower stated debt to GDP ratios may allow it to maintain these massive subsidies far longer than heavily indebted governments in developed countries could if they were to seek to challenge China by implementing similar measures, so it is no wonder that foreign competitors have struggled to match the China price that these Chinese Communist Party controlled corporations can offer. And, foreign governments have become so reliant upon China for desperately needed trade and financing they lack the political will to challenge China's predatory practices, provided that they have not become so entranced by the apparent success of these government-backed measures that a sense of shared ideology might even lead them to condone such measures instead.

Condoning what could arguably be called economic warfare is obviously foolhardy, and would merely accelerate the weakening of the economies of these countries, potentially leading to lost wealth through financial crises and lower standards of living through lower wages and higher unemployment. Yet, this is not a concern to the leaders of the CCP. They are intent only on increasing their power, and relying upon rhetoric regarding China's century of humiliation to support this ambition even though it was China's own leaders who contributed to China's failure to keep pace with advances taking place in the rest of the world by, for example, the large scale social experiments that characterized Mao's "Great Leap Forward" that resulted in the deaths by starvation of tens of millions of peasants who were forced to abandon their farming activities in order to produce pig iron using primitive methods. Although ever increasing levels of debt may have helped to disguise the folly of such central planning efforts as it does today, the perpetuation of activities that make no economic sense absent such artificialities are not sustainable so will likely lead to the same disastrous results only on a larger scale.

So, yes, there are reasons to be concerned about the CCP's attempts to expand its power and its unsustainable lending practices by creating new regional financial institutions modeled after its own inherently flawed banking system. What the world needs is sustainable growth fueled by fundamentally sound economic activity backed by fundamentally sound banking practices, i.e., a global economy that is closer to a true market equilibrium governed by the natural market forces of supply and demand, rather than a stable disequilibrium governed by powerful elites who rely upon their control over the banking system and ever increasing levels of debt to ensure their hold on power.

What the world does not need is higher and higher levels of debt to support higher and higher levels of CCP controlled productive capacity intended to both drive out foreign competitors from the strategically important industries that the CCP has targeted, and to make its neighbors and commodity-rich countries more heavily indebted to the CCP so it can advance the agenda of its privileged elite who seek to expand their reach outside of China by acquiring control over global financial institutions rather than just their own. If the Chinese people would prefer to direct their savings outside of China, and correspondingly outside of the reach of the CCP, they should have the opportunity to do so through existing financial institutions that insist upon sound policies designed to prevent global financial crises rather than through new CCP controlled financial institutions likely to result in the same politically motivated lending practices and disguised non-performing loans that have led to the fragile banking system that exists in China today.
- Mansoor Ahmed Apr 21, 2015
  
  Mr. Holt's rant clearly shows where the American oppostion to AIIB comes from. His assumptions, upon which his whole argument hinges, remain unsubstantiated throughout his interminably hollow lecture. His cynically selective references to historical misinformation leaves little doubt in my mind why any "windbag" is always incapable of seeing the long term view or the pragmatic logic of a brilliant piece written by a Nobel Laureate economist. Bravo Mr. Stiglitz for speaking the truth with flawless analysis.
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- Derek Mason Apr 17, 2015
  
  So don't favor the AIIB because it is sponsored by "that" kind of government, coming from "that" country. If you don't agree with China starting an infrastructure development bank, then please ask your government for the funds to finance Asia's well being. If your government doesn't have the money to do so, then stop hating on others who are trying to create a better connected region in the world. Oh wait...they can't possibly do any good in this world...because...dare I say it...it's China and any kind of initiative coming from China MUST be bad right?
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- Christopher williams Apr 17, 2015
  
  Mr Holt goes, at extreme length, to comment on China's record of investing in development in its own country - and in other areas of the developing world - noting that much would not have met the exacting standards of the World Bank/ IMF/ ADB. I have to say that I do not see this as an area for criticism, but of hope for those wanting to see an end to the austerity-based tenets that control much of the democratic world. "Free markets" and "individual liberties" sound wonderful, but not to those in Greece and Spain, where unemployment for the young is over 50% due to such freedom.
  I accept that the AIIB is created to assist Chinese heavy goods companies in generating demand for their products, partially in order to keep up growth targets. It is also true that these infrastructure developments will not all return a quick, or even reliable, return. But perhaps that is what is needed at this stage of development, not just in Asia but in much of the world where growth is non-existent.
  What is interesting is the membership applications from outside Asia. While we can be cynical, and suggest this is solely in order to attract commercial contracts, I think there is an element of actual belief that it is time to try a new format in world financial order. One that is not so US-centric. Let us trust that this is operated in parallel to the current system, rather than in competition. We should be just as aware of the US government debt problem as Mr. Holt's view on Chinese internal financing.
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Donald Francoeur Apr 15, 2015

I agree.
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Yoshimichi Moriyama Apr 15, 2015

Bijing had not expected that so many countries would apply, and there is confusion what to do with AIIB as itt initially wanted to have its way in the management. "A Chinese proverb says 'they sleep in the same bed but dream different dreams.' The AIIB founding members are a diverse group with a range of investment agendas (Will Hickey, Nations Line up to Join China-Led Infrastructure Bank; China's AIIB could source of sour grapes or valid concerns on standards for US and Japan/www.yaleglobal.yale.edu/.)"

The Chinese Communit Party does not seem to have much money and has yet to keep high-economic growth. "For example; one Chinese friend has told me recently that, "The Communist Party is empty...Businessmen are complaining that they are being squeezed by local governments which are hocked to the eyeballs over masssive infrastructure projects which will not show a return on investment for quite some time. Local officials have already appropriated peasants' land and bled them dry. And they can't sell the land that's left because it's practically worthless...Now that the county piggy-bank is empty, the middle-class is asking where will the money come from to pay the interest on the huge loans that were taken out to finace these grand schemes? (Brian Hennessy, Reading the tea-leaves in China, www.onlineopinion.com.au/." And there is excessive over-prodution capacity, because of the investment-led economic growth policy, in iron, cement, aluminum, etc.
I do not know if Beijing is happy or unhappy as it wanted to get over the economic difficulty by building ghost towns abroad, with so many enthusiastic participants because of a transparency and equality issue that will be raised in the management.
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Rocio L. Barrientos Apr 14, 2015

Kudos to the USA for opening a new era with Cuba, inverse kudos for boycotting such a solid initiative.
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Gunnar Eriksson Apr 14, 2015

"The problem is a financial system that has excelled at enabling market manipulation, speculation, and insider trading, but has failed at its core task: intermediating savings and investment on a global scale."
The truth in the statement is hard to contest, but the question is why the core task is neglected, and it is not only the financial industry that suffers from this. Any flow, process or operation is increasingly perceived mainly as an opportunity for rent seeking while the core mission is disregarded.
The path back towards focus on the core tasks are the values we all hold. We need to revitalize the basic tenets of the prosperous Western world - the natural desire to achieve something for the common good. Money to be relegated to a means for achieving something not as now; an end in itself.
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patrick neid Apr 14, 2015

America's opposition? Could you identify who makes up this opposition Mr. Stiglitz. Thank you.
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Procyon Mukherjee Apr 14, 2015

The opposition to AIIB is fully understandable as the International Pension Funds and the Bond market in concert have a long term eye for the Asian infrastructure development and want to fund these where the locals could access dollar loans via this route.
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hari naidu Apr 13, 2015

Hidden between the lines is reluctance of Abe's Japan to join AIIB - most probably due to Obama's opposition. Mainland China is actually now offering Sri Lanka a Trilateral infrastructure project proposal which will link up with Modi's India in the subcontinent. Yet India is unwilling to show good intentions in regional influence for political/military hegemony. Sino-Indian relation will nevertheless benefit if such regional cooperation are put into effect...
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jagjeet sinha Apr 13, 2015

When the Global Financial Infrastructure itself needed additional players capable of intermediation of the global savings glut and channeling them towards infrastructure investment, it was indeed strange to find opposition to AIIB. In fact there is need to supplement China's gallant lead with similarly engineered Infrastructure Banks for Emerging Africa and Emerging Europe besides Asia. Those in a position to fund such initiatives no doubt will find Professor Stiglitz encouraging their efforts. Timely and encouraging inputs from Nobel minds is perhaps why the world needs Nobel Laureates.
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Mila Kasalica Apr 13, 2015

Thanks, professor. Right in the core.

Too bad that the world of finances from Wall Street has not learnt a single useful thing from Big Recession.
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Ashok Meena Apr 13, 2015

I agree that it is a very good initiative. All the apprehension regarding AIIB ending up becoming a tool in the hands of China, ironically, could be reduced through greater participation and support from outside. The soft power of other partners will insure that the new institution delivers on globally accepted environmental, and social standards, while making infrastructure funds available to most needy countries with large poor populations. I hope, the world leaders could see it as an opportunity for enhancing multilateral competitive race for enhanced technical assistance, knowledge sharing and ideas along-with infrastructure funds!
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