Joseph Stiglitz, economist and Nobel laureate

 

At a press conference with Japanese Prime Minister Shinzo Abe in April, US President Barack Obama tried to clarify the US position on the Asian Infrastructure Investment Bank (AIIB), saying the United States is not opposed to the existence of the bank or the participation of other countries in it.

But some academics have pointed out that the Obama administration was not initially friendly to the AIIB, nor was it supportive of other countries’ decision to join the bank. America’s stance on the bank generated widespread criticism from scholars, including Nobel laureate Joseph Stiglitz, who argued for the bank’s various benefits while decrying America’s opposition in his article “Asia’s multilateralism,” published in mid-April. 

“One would have thought that the AIIB’s launch, and the decision of so many governments to support it, would be a cause for universal celebration,” Stiglitz wrote, contending that the AIIB will help satisfy Asia’s tremendous demands for infrastructure.
 

He elaborated how infrastructure investment has facilitated the exchange of human resources, commodities and ideas and contributed to economic growth in China. He said he is convinced that the AIIB will benefit other Asian countries and regions in a similar way.
 

Stiglitz then explained on how the AIIB will benefit the global economy, which is suffering from insufficient aggregate demand. He concluded that the global financial market has failed to recycle “savings from places where incomes exceed consumption to places where investment is needed,” and the global financial system is not able to facilitate savings and investment on a global scale.
 

The AIIB, however, will boost global aggregate demand, he said.  He argued that the AIIB and the BRICS countries’ New Development Bank will help to make the flow of funds multilateral, thus contributing significantly to global development.
 

“There is clearly a need for the sort of development investment that the AIIB plans to get engaged in. It is something that is good for everybody,” said Shaun Breslin, professor of Politics and International Studies at the University of Warwick. Profesor Breslin said that the UK’s participation in the AIIB indicated that the country intends to consider China as a financial partner instead of a threat. 

Stiglitz wrote that while the IMF and World Bank have embraced the AIIB, the US was alarmed to see advanced European economies joining the bank, having covertly put pressure on its allies to stay away from the bank. The US reaction, he wrote, indicates that it feels insecure about losing global influence and hopes to maintain its hegemony.
 

 Breslin said the US reaction is “unfortunate.” He said that the AIIB has provided an opportunity to establish partnerships and many countries, including many in Europe, have accepted it.

“On a more pragmatic level, it is easier to influence from the inside as a participant rather than looking on powerless from the sidelines,” he said, suggesting that it is in the best interests of the US to embrace the institution. 

Experts also commented on how the AIIB can function better. Rather than serving simply as a funding vehicle, the AIIB will be more successful if it acts as a “knowledge bank” that helps to share experience, practices and technical knowledge, former IMF chief economist Kenneth Rogoff said.
 

While the US has repeatedly voiced its concerns about the AIIB’s standards and transparency, Rogoff expressed confidence that China will be able to forge a positive new approach to global economic governance and that the bank will benefit the common good.

 

Jiang Hong is a reporter at the Chinese Social Sciences Today based in London.