Dithering on AIIB is Obama's paranoid legacy
- By Sumantra Maitra
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E-mail China.org.cn, March 26, 2015
Chinese and American geo-political rivalry is well known, and rarely, goes unnoticed, but when China under Xi Jinping first came out with the proposal for AIIB, no one in Washington uttered a word against it. Since then, major European and Asian powers, half of them American allies, have joined the bank, despite Washington's deep reservation as to its creditworthiness.
This reflects a couple of important geopolitical trends. The most notable is the break in Europe's fiscal ties with America. Europe, led by Germany, has started to show independence from the American dominated and led fiscal policies seen in recent decades, in a sign of renewed self-confidence, and swagger, since the 2008 financial crash. We saw this trend, in European dealings with Russia over Ukraine and natural gas supply, and it continues with the Chinese-led AIIB.
It also shows that confidence in the IMF and World Bank is generally faltering and there is a general demand among several Southern countries for alternative sources of banking. African and Latin American countries specifically have always raised this prospect of having specific development banks for their own system, as have countries in Europe facing austerity policies guided by the IMF. It is however too early to claim that the AIIB is going to be competitive or a rival to IMF; Indian leaders have mentioned its complementary nature.
Finally it shows a rare petulance in American foreign policy under a Democrat government. Even American officials and foreign policy experts are expressing in private that the administration made a serious mistake in opposing the AIIB, and then dithering under intense pressure, and severely overestimated U.S. influence when it comes to the fiscal policies of its allies, and generally came out with a bloody nose.
The fact that the AIIB will start with the involvement of several global powers, is a dead giveaway. In the age of fiscal distribution and global capital sharing, the timing of the AIIB's emergence is perfect. From David Sydney, fellow of Atlantic Council, to Paul Haenle, of Carnegie Beijing, this blatant opposition was condemned as extremely shortsighted. The AIIB will proceed with or without American support; this overt lobbying makes the United States look weak and insecure.
Also, another fact has not gone unnoticed. For a country based on the free-market and always promotes laissez faire policies, the opposition of United States to the AIIB is baffling. Similarly America has been pressing China to assume a share of the global burden; but when push actually came to shove, it tried to stifle support for the initiative, which seemed, in lack of better word, a bit hypocritical.
The prudent way was for the Obama administration to welcome the initiative, and be an equal capital member with China. Perhaps the Obama administration should learn something from the previous Bush administration, which was diehard in its support for global burden sharing, and signed more free trade agreements than any other U.S. in U.S. history.
China and AIIB must also not be complacent and heed the word of advice about creditworthiness, and make sure not to make risky loans to countries with no chance, option or intention of paying the money back. It must follow a strict fiscal discipline. The last thing the world needs now are more bad debts by countries with zero repayment capability. However, for the moment, in this battle of economic influence and soft power, China stands the clear winner.
The writer is a columnist with China.org.cn. For more information please visit: http://www.china.org.cn/opinion/SumantraMaitra.htm
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