Europe Tilts East Towards China
Posted on March 21st, 2015

Prof. Michael Hudson Reports

: Britain, German, France and Italy are among those who joined Asian Infrastructure Investment Bank in an expression of their discontent over World Bank polices that force developing countries to depend on the US

Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His two newest books are The Bubble and Beyond and Finance Capitalism and its Discontents. His upcoming book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.

The Asian Infrastructure Development Bank, an Asian rival to the World Bank, was launched by the Chinese president, Xi Jinping, last year. Initially it was an Asian initiative, but last week, U.K. was the first European country to join the bank information, causing some friction between U.S. and Britain.

Now a few more European countries have joined the ranks of China, among them Italy, Germany, and France, and Australia is waiting in the wings.

Now joining me to discuss all of this is Michael Hudson. And as you know, Michael Hudson is a regular guest on The Real News Network. Michael is a distinguished research professor of economics at the University of Missouri-Kansas City. Given the subject matter we’re dealing with today, you may be interested in his book called super imperialism, specifically the chapter on the World Bank.Thank you so much for joining me.

MICHAEL HUDSON, PROF. ECONOMICS, UMKC: It’s good to be here.

PERIES: And given the subject that we’re dealing with today, Michael, you’re going to be talking about perhaps the book you had published very early on, called Super Imperialism. And there’s a particular chapter I wanted to reference here on the World Bank.So, if you are more interested in what Michael is about to say today, you should look that book up.Thanks for joining us, Michael.

HUDSON: It’s good to be here, Sharmini.

PERIES: So, Michael, let’s begin with the Asian Infrastructure Investment Bank. The Chinese have established this bank with a $50 billion investment. Now, is this then a serious challenge to the World Bank?

HUDSON: Well, the idea is to make an alternative development philosophy to the World Bank. From the very beginning, the World Bank has been basically an extension of the U.S. Defense Department, from the first president, John J. McCloy, who is assistant secretary of defense, down through Robert McNamara, 1968 to ’81, and then by the neocon cold warrior Paul Wolfowitz, 2005 to ’07, and Larry Summers, the chief economist, along with Bob Zoellick.

So you have the purpose of the World Bank lending essentially for plantation export crops, for export crops to make countries avoid producing anything that might compete with American exports, above all grain, although every single mission of the World Bank, country mission, has recommended that countries undertake land reform and agricultural extension to help promote family farming and countries to feed themselves.

The World Bank has not made loans for this.The World Bank, under U.S. congressional pressure, has said, look, we’re not going to finance countries becoming independent of the United States; our function is to make them export more to the United States and to buy from the United States. So the funding of the World Bank has mainly been to fund infrastructure developments, vastly overpriced, to Third World countries to create money for American engineering firms; also to lend out dollars and to indebt countries to it; and worst of all, to promote privatization. And that’s really the big difference between the Chinese Development Bank’s philosophy and the World Bank.

The World Bank is pressured everywhere for privatization of public utilities, of basic infrastructure, and then it will make loans to the governments to develop this infrastructure or the roads and the external economies, and then sell them cheap to American buyers, who essentially will create monopolies and turn infrastructure into a rent extraction to squeeze out interest, dividends, management fees that are all going to be paid to the Americans. And this has been raising the price of basic utilities–communications, transportation, water, and other things throughout the Third World. And this has made these economies uncompetitive with the United States that has a mixed economy where the government subsidizes infrastructure.

So the Chinese Development Bank is to help make other countries get independent of this sort of neocon, neoliberal, right-wing economic philosophy and work government-to-government, help governments develop infrastructure, so that they can provide basic services at a lower cost or a subsidized cost, or even freely to the populations. That’s how the European countries and American economy got rich. And the only way to help repeat this process is to make a clean break from the United States and the World Bank.

PERIES: Now, I know that Secretary of State Kerry has stated that they have some concerns about the standards of this new bank. Now, how do we know that the new Asian Infrastructure Investment Bank will not follow the same model as the World Bank because the president of China, Xi Jinping, had already said they will borrow policy and standards of the World Bank in making sure that they are–they address the secretary of state’s concern.

HUDSON: I think he’s being very polite. The Chinese are always very polite. In my visits to Beijing, when they said they would learn the lessons of the World Bank, that means they learned lessons of what to avoid.The good standards that Kerry talked about is Orwellian rhetoric for the standards that are thoroughly corrupt, thoroughly insider dealing. They’re the standards that led the IMF to make the military loan to Ukraine last week. They’re the standards that have made the World Bank support dictatorships and arm governments throughout the world, and to isolate any government that is not part of the U.S. diplomatic orbit, to isolate Cuba, Iran, North Korea, and not to make loans to governments to try to have a mixed economy.

So when China learns from these standards, it’s learned what to avoid and to do exactly the opposite, to make, to create an independent trading and financial system and development system that does not–to dovetail into the U.S. economy.About 30 or 40 years ago, the World Bank produced a document called Partners in Progress. And my review of it in Super Imperialism was called “Partners in Backwardness”. In the discussions I’ve had in China, in Russia, they’re very clear that the World Bank has tried to underdevelop them.In the case of Russia, for instance, many colleagues of mine who are land assessors went, met with St. Petersburg in–and to Moscow, and including Vladimir Putin, as early as 1991, and outlined how Russia could maintain its tax base by taxing the land, taxing the natural resources.

As soon as they’d left, the World Bank came in and went to the various Russia cities that had agreed to try to use land and natural resource rents and said, we will give you huge amounts of money if you don’t tax the land. We want to untax it so you can privatize it. And indeed it was privatized to the kleptocrats. And the only way the kleptocrats and the other owners who privatized these natural resources in Russia could cash out was by selling them to American and foreign investors in oil, gas, iron ore, diamonds, nickel, and other raw materials Russia had.So Russia realizes that when the World Bank and the AID [International Development Association (?)] came in with the Harvard boys, and with Larry Summers playing a key role, that they were totally screwed by this.

So they’ve learned to take a different development tack, to be independent in food and other manufactures, and independent of the kind of warped development strategy that the United States has. And especially this is designed to finance two things. It’s to finance Chinese and other infrastructure development. Rather than having the U.S. expensive firms come in and build roads and airports and things, the Chinese will do it.But there’s another reason for this, that the United States has already started a financial Cold War against China, Russia, and the BRICS. And it’s been going to country after country. In Ukraine, for instance, it said, try not to pay the debt that you owe to Russia. It’s gone to Sri Lanka and said, let’s back a right-wing dictatorship or a right-wing group that doesn’t pay China.

So China has had great trouble collecting on the vast infrastructure investment that it’s made and is supposed to be paid for by these countries. And the U.S. is trying to stiff it in trying to have countries default on loans that are to the BRICS and default to any country that is not in the U.S. military Cold War orbit.And so China thinks, well, if we have an international bank on the same stature as the World Bank and the IMF, then when countries owe foreign debts, just as they don’t write down the foreign debts to multinational institutions like the World Bank or IMF, so they won’t write down their debts to the China Development Bank, because we have France, Italy, England, and other Asian countries all in it together. So this protects China’s investment abroad and China’s loans to government to help develop the infrastructure, whereas under the United States, when countries can’t pay to dollars, then the IMF comes in and imposes austerity. There’s no indication that China’s going to come in and impose the same kind of crippling austerity that the World Bank and the IMF have been imposing on countries.P

ERIES: How do we know that?

HUDSON: Well, in the discussions I’ve had with Chinese and Russian officials, that’s what we talk about. The first book of mine, as I said, that was translated into Chinese and Russian was Super Imperialism, and that led to many years of discussion with them.

PERIES: Now, I have actually seen and witnessed what China’s impact has been in some of the Latin American countries where they have huge investments in infrastructure development projects, which often isn’t in the best interests of those countries. For example, China brings in a number of their labor, thousands of Chinese workers, to those sites to work, and they’re basically importing labor, not hiring the local labor for these projects. Now, that’s what I witnessed. How do we know that China is really going to be different, apart from the discussions they’re having with you? Is that reflected in any policy? Or are they trying to have these conversations in a more collaborative way with the southern countries?

HUDSON: Well, for almost any countries for the last few hundred years that has been putting it in infrastructure, it’s pretty much used its own labor and management. Certainly the World Bank has always promoted very expensive American management and American workers for this. Britain did in its countries. I think China wants to make sure that it has control. And, after all, it’s trying to do–it’s already trained its labor specifically for these projects. And the World Bank has been and the IMF have been very careful to prevent other countries from developing the kind of labor and developing the skills that would lead them to create this infrastructure, precisely in order to make them dependent on World Bank and U.S. leadership. And of course China is going to be using its own labor, but in principle, obviously, these countries need to develop the skills so that they can say, look, we have to have our own labor work here too.PERIES: So, Michael, in our next segment let’s take up what this means in terms of the Europeans joining this bank and the impact that’s going to have in terms of the relationship–at least the financial relationships–between the United States and these European countries.

HUDSON: Fine.

PERIES: And thank you for joining us on The Real News Network.

7 Responses to “Europe Tilts East Towards China”

  1. Christie Says:

    Namaste: We see China is trying to lead the world but it has to look at the impediments that will be in its silk route. The world is not the world of the days of the silk route. Any Chinese lead is going to be poisoned by the same old Indian-British alignment of Imperialism and hegemony and where is Japan in this equation. Will Indian Imperialists side with the rising sun. Jai Hind

  2. Fran Diaz Says:

    It’s ok for Europe to tilt toward China, but not for others ? Or is it that others have to go through the west to reach deals with China ? This means double payments – one to Europe and one to China ?

  3. L Perera Says:

    The likes of Canada’s Harper and Britain’s Cameron – the two pork chops who hounded Sri Lanka with claims of war crimes etc ( that pale into insignificance) when compared to past atrocities committed against Native Canadians and the Dresden bombing – have conveniently and unashamedly side stepped issues relating to China’s supposedly dismal human rights abuse record and are now regulars in that country with the Trade begging bowl.

  4. LANKAPUTHRA Says:

    First let me thank Professor Michael Hudson to give the Sri Lankans an window to show what OBAM has done to USA. And to Sharmini Peries, executive producer TRNW. The Real News Network, and she is coming from Baltimore. I also thank the person who published dialog of Sharmini Peries on the Lanka web. I live in State of Florida, USA and I get many different news feeds, Radio, TV, Internet and e-mails etc., Looking at the number of comments, I can clearly say none of the comment writers understood the article contents. The spectrum of article and comment writers are not interested how this election was won by Srisana President. OBAMA planed this process in 2007 when Erick Solhime requested from OBAMA a regime change. He made a quick decision after he realized that the Election Commissioner was retiring. Obama paid huge bribes to election department officials to put Mahinda (His first name was not Mahinda he changed it for the job application) Dashapriya, common law JVP Criminal and traitor was in the election department. State Department then trained him on news presentations. As one can see before he starts news conference, HA, HA, HA… Then he was given a course how to stop the computer and manually edit the incoming results. What did he say at the news conference? After the election; Computer was over loaded. Did any one ask him what is COMPUTER OVER LOADING? No! Ranil W. fired this man who asked the question and replaced him with one of his friends. Ranil W. told his followers that they will be KILLED if some one says that the ballot Boxes were stuffed. Even GOMIN is afraid to write in his articles that the Ballot boxes were stuffed.

    I certainly buy your book KILLING THE HOST: How Financial Parasites and Debt Bondage Destroy the Global Economy. I hope you will come on the Dian Rheine show or Joseph Cooper at 2.00 pm EST or market Place, with Kyle Rusdolf.

    Now let see what this MENTALLY RETARED CLOWN Bernard Wijeyasingha calling you “HAMHOOKS” Then he calls you Professor Hakenbush (BUSH WACK would have been a better name). I feel bad because this UNEDUCATED peasant calling names to a distinguish highly educated research professor names! Bernard Wijeyasingha, you dumb clown, who is paying you kappan to discredit any one supporting Mahinda Rajapkse? You write “WHITE AMERICANS” I have not seen people with white skins, but I have seen Americans with pink skins. Your skin color must be pitch black like a TAMIL, similar to Mangla. Bernard Wijeyasinghha, who are you and where do you live? Where did you get this! US Dollar falling below 40%? What a dumb statement. Did you look at todays Stock Market? ASIA TIMES is partially owned by RANIL W’s uncle so what do you expect? For Dummies like you to read. Rest is owned by Inner City press, who are the TAMILS FOR OBAMA accountants.

    Christie, NAMSTHE GUMSTHA, You got it all wrong, the INDIA you are talking about was long before Mody came to power. Did you read MR’s interview?

    Fran Diaz, You got one thing right and did not attack the Prof; Sri Lanka cannot go to China to get loans any more RANIL W. took care of it. If SL goes to an European county, that is listed in the article, they will jack up the % rate and take a profit. Do you now see the value of MR. Again, not saying that he did not do dumb things like keeping VASS GUNAWARDENA and then; prime minister D.M. Jayrathne’s son the drug dealer, also Marvin Silva’s son covered up.

  5. Cerberus Says:

    Interesting discussion with Prof. Michael Hudson on The Real News Network about the
    origins of the World Bank and its manipulations to garner available raw materials from
    the debtor countries and impose conditions of privatization and austerity to follow the
    inevitable difficulties placed to service such debt. Prof. Hudson even stated that the
    World Bank was currently attempting make countries where China has invested on major
    infrastructure projects to default on such repayments to cripple China, and have the
    debtor countries resume dealings with the World Bank.

    The link to the 15 minute interview is given below:
    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=13470

  6. Marco Says:

    Think the comments above reflects the mentality of some commentators and is becoming increasingly regular at Lankaweb.
    Long were the days when the moderator allowed only civil debate on issues and deleted vitriolic personal abuse.

  7. Cerberus Says:

    Mr. Bernard Wijesingha you have finally come out in to the open as a Tamil Elamist after pretending for so many years to be Sinhalese. Why is that Tamils find it so easy to lie, and cheat and decieve? You should go back and build up your home land in Tamil Nadu. Then all your compatriots will follow you back to the home land. Please do not curse the Sinhalese who gave you everything including free education, free health care and even free food. It will bounce back on you. Sri Lanka is the only land the Sinhalese have and they cannot afford to break it up.

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