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Friday, July 31, 2020

Brookings (David Dollar): The Belt and Road Initiative in Africa

The Belt and Road  (BRI) Initiative in Africa

by David Dollar

A FASCINATING and well sourced study!

The origin of my deepening interest in Belt and Road is a  desire to define a "fair trade", fair between nations, fair between labor and businesses, fair between working peoples of trading countries. Once a framework, or principles, of Fair Trade can be established, the grounds for negating imperialistic aspects of globalization and trade, across a broad coalition, can be built.  The motivations behind Xi Xinping's BRI initiative clearly intends counter specific "imperial" features in US an EU development agendas: extraction without reinvestment; political interference; military and covert interventions; demanding harsh austerity in pubic services of indebted nations; refusing any financing at all to at risk nations.

From the standpoint of socialist theory, at least in my view, the key questions that emerge from the study of BRI in Africa are:

1. Xi Xinping's defense of "infrastructure corridors" as the material foundation for linking nations has a good intuition, I think, for anyone familiar with historical materialism. And Xi Jinping is most definitely a Marxist. But is it true? Is technological linkage an essential foundation for cooperative vs exploitative globalization? The answer in part depends on whether sustainable economic growth for most of the world depends on expanding globalized connections, not reducing them. But from a materialist perspective, this is the most important question. If correct, it greatly improves odds of progress and success.

2. Accept heterogeneous socio-political models in trading countries, based on principles of peaceful coexistence between varied social systems. The author uses "authoritarian" and "socialist/communist" interchangeably. A debatable matter, but of less importance here.  Accept these differences agnostically with at least one major exception: pay to play institutional corruptions with respect to the construction and operation of infrastructure projects must be minimized in order for the national growth to exceed the costs of debt service by enough to achieve the hoped for rise in standards of living, and economic spinoffs that could accelerate growth. Does BRI succeed here? Questions have been raised about the mostly Chinese workers that construct the infrastructure project, although, initially, that appeared to be motivated by China's own surplus of skilled labor, AND, doubts about their management abilities to control costs on a big project with little management experience of workforces with very diverse, sometimes very low, capacities. Further, some criticize the lack of full disclosure of the terms of some cooperation agreements, although the reasons for that are not given.

3. BRI enables commercial financing between lenders (mostly China) and borrowers -- African states, in this study. Are BRI interest rates fair, and not exploitative? By what standard does one make that judgement?  China has its own national development and resource and labor force development  imperatives. The loans are not free. As the author states:

" BRI is in fact global and motivated by economic and strategic interests. A successful BRI would allow China to more efficiently utilize excess savings and construction capacity, expand trade, consolidate economic and diplomatic relations with participating countries, and diversify China's import of energy and other resources through economic corridors that circumvent routes that are controlled by the U.S. and its allies."  

In principle a state that borrows is prudent if the capital asset purchased can return a value greater than the principal and interest combined. Brookings argues that BRI succeeds here most of the time. However, some criticism observes that in a few cases the investments have not performed as well --  thus China charged higher interest rates than the investment could service. On the other hand, those same countries could get NO infrastructure funded at any rate from the IMF or the World Bank. 



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