Is the New BRICS Bank a Challenge to US Global Financial Power? | TRNN 2014-07-18
Michael Hudson and Leo Panitch discuss and debate the significance of the new international development bank created by Brazil, Russia, India, China and South Africa
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JAY: Okay. So, Michael, if I understand, your main argument is—in some ways it’s not that different, in some respects, from what Leo was saying. You’re not saying they’re getting off the whole capitalist bandwagon. What you’re saying they’re doing is buying themselves a little more room in terms of their foreign policy.
HUDSON: There is a very broad range over what they can do. And if you look at what is the most likely of common denominator, it’s exactly what Leo said. The common denominator is it’s their capitalists against the U.S. capitalists, it’s their saying, what can we do to be free of the U.S. banks and Wall Street and the City of London and the financial extractive loans. At least the neoliberal plans today have gone beyond trying to finance infrastructure development. The financial system in the West is almost entirely extractive now, not productive. The capitalist class in the countries that Leo’s mentioned want at least some bank to do some productive loans that they can benefit from, rather than having the U.S. come in and grab everything for itself like a privatization on behalf of the U.S. You see this kind of fight going on in Greece right now, where the eurozone said, Greece as to privatize its natural resources to pay the debt. Half the privatization last year was to be the sale of its gas rights.
PANITCH: So, I’m sorry, I don’t see the world in terms of competition amongst the capitalist classes of the world in the sense you’re speaking of. I think there is a very deep integration on the part of the leading capitalists in these countries, including the domestic ones, into globalization. I think that’s true of Vale in Brazil.
JAY: That’s the world’s largest iron ore company.
PANITCH: That’s the world’s largest iron ore company, which, sure, is competing with other iron ore companies. But it doesn’t see itself as aligned against the American bourgeoisie or the American capitalist class. This is not right.
And moreover, I think that these capitalist classes very much want access to the deep financial markets of London and New York. They don’t want to leave them; they want to be part of them. They want access to them. Indeed, they’ve been floating bond us in those markets—dangerously, in terms of volatility. So I think—and it has to be said the reason they do so is that their financial markets, their bond markets, even the European bond market relative to the London/New York access, remain extremely weak, extremely vulnerable. So it’s also a matter of where the deep institutional strength of capitalism is.
I would make one other point. I don’t think that finance, even Wall Street and London—the City of London finance is merely parasitic. I think it facilitates, it underwrites, it’s very important in terms of hedging for all of the integrated production that goes on between China and the United States, between South Africa and Europe. This plays a functional role for all these value chains. Of course there’s loads of speculation in this, but it means that industry is linked up with this speculation. These aren’t separated compartments. And you can’t unscramble them.
HUDSON: I see that I’m emphasizing the geopolitical much more than you of nobody’s talking about Brazil and other countries not interacting with the London and New York money markets. What they don’t want to do is to have the U.S. government and U.S. banks act as a threat, a threat against their countries. And of course they’re trying to keep their—have other options apart from being tied into the U.S. as a system of control. They want to break free of U.S. control, basically, and European control is a satellite of the United States.
PANITCH: Yeah. But since politics and economics aren’t so easily separated, their continuing interest and increased interest in being linked economically and financially means that the American state, given its superintending role of Wall Street and the City of London, will continue to have power vis-à-vis them. They would like to, as we’ve agreed, they’d like to have more room for maneuver in the face of that enormous power of the American Empire, but they are not interested in breaking from it.
BRICS: Progressive Rhetoric, Neoliberal Practice | TRNN 2014-07-14
Patrick Bond: All the governments behind the New Development Bank practice intense neoliberalism
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JAY: Okay. So let’s say that they are as neoliberal as they come. But at the geopolitical level—like, for example, let’s take the leadup to the war in Iraq. Now, France is not part of BRICS, but France, for its own reasons, its own interests, stood up to the United States at the UN Security Council in quite an interesting way. So did some of the other countries. I mean, China, I think, actually could’ve been, certainly, bolder than they were, but they couldn’t get—the Americans couldn’t get the votes they wanted to give a clear-cut authorization of the Iraq War. It didn’t stop them from doing it illegally anyway, but it was an important moment. And with an institution like this new bank, and perhaps even building on that—for example, right now there’s the sanctions against Russia over the Ukraine. There’s a story in The New York Times today that it’s not going to have that much effect. One of the major Russian oil companies was targeted for sanctions, and one of the sanctions was going to make it more difficult for it to get capital in the Western capital markets. And now, apparently, they’re just going to borrow the money from the Chinese, and so the sanction’s not going to affect it as much. So I guess my question is is that within this context of global and neoliberal capitalism, getting to a more multipolar world, getting to a point where some of these other bigger powers can push back against the United States, which clearly is the biggest military operation on the planet and is the one that keeps starting major war after major war, is this—whatever room they can create for themselves, isn’t this a good thing?
BOND: Well, it could be if the modus operandi operates in a way that reduces U.S. power systematically. But as we’ve seen, when there are inter-imperial rivalries, that can often lead to a much more dangerous outcome. For example, the way to handle the kinds of pressures that the U.S. puts on other countries—the coalition of the willing, certainly, in the UN Security Council in 2003, the U.S. was unable to get authorization, because the Chinese and Russians and French wouldn’t support—they would veto the approval. But, you know, in May they then approved that the U.S. could run Iraq, having invaded it.
What was interesting this week on that front was that the UN Security Council reforms that are being proposed for many years to widen up the permanent members with a veto to move from five to ten by adding three BRICS—South Africa, Brazil, and India, as well as Germany and Japan—those ideas, which you’d have thought perhaps China and Russia would have supported to get more of their allies on board in the Security Council, they didn’t. It was quite a revealing memorandum that was released at the end of the BRICS summit in which the BRICS only said that it would be an increased role for the these other three smaller countries, as opposed to China and Russia.
JAY: So this inter-imperialist rivalry is even amongst the BRICS countries. And we even saw this with a big fight between China and India about where the bank was going to be—this new bank was going to be based.
BOND: Well, indeed. There was a lot of face-saving. And I can just imagine these finance ministers, reserve bank governors, and all of their bureaucrats fighting over the fine details. They eloquently and geometrically resolved that by setting up all kinds of mechanisms to appear that each of the five countries got a little piece. For example, in South Africa, Johannesburg will have a branch plant of the BRICS bank, and that will allow South Africa to help control the funding flows in and out of Africa, which is South Africa’s so-called gateway role that they’ve desired, and that would be very much an example of South imperialism insofar as the hinterlands of the BRICS countries are under the thumb of the regional hegemons, South Africa in Africa probably wanting now to have a more regularized extraction system of the valuable member minerals and petroleum from this continent.
However, I think you’re right that we will probably see the kind of tensions in a logic of expansionism, territorial ambitions of a Russia and China. Well, Russia now, of course, moving to the West to try to capture some of the ground lost when the USSR fell apart, China moving aggressively even into Vietnamese territorial waters to grab islands, of course the conflict with Taiwan and Japan, these are moments where I think there’s a fair bit of danger, and not just in the symbolic sense of territorial expansionism, but actually in potential alliances, that the BRICS will become an inter-imperial force with a more aggressive approach to capital accumulation. And that’s where these two logics come together.
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