US imperialistic power is overtly demonstrated by its massive military that can be used to easily overpower most nations, though we have seen that controlling the aftermath is much more problematic. But a major source of US power is exerted more covertly, by controlling the financial centers of the world. Note how it uses that power to annex the assets of countries it has conflicts with and prevents them from having access to international capital or denying them the lines of credit and insurance that are necessary for trade.
The US dominates international organizations like the World Bank and the International Monetary Fund, enabling it to dictate policies in many countries in exchange for loans. But the harsh austerity measures that these institutions impose as part of their neoliberal ideology has resulted in great hardship for the people in many nations.
Walden Bellow writes China has taken advantage of this dissatisfaction to create a new international development bank called the Asian Infrastructure Investment Bank (AIIB) that will challenge the dominance of the World Bank, IMF, and the Japan-dominated Asian Development Bank. It is the third such transnational financial institution initiated by China, following the creation of the New Development and Bank and the Contingency Reserve Arrangement.
It was no surprise that China’s partners in the BRICS alliance (Brazil, Russia, India, and South Africa) signed on to the AIIB. But what concerned the US is that despite it exerting strong pressure, the UK, France, Germany, Australia, and Italy also signed up. Why did they go against Washington’s wishes?
For Washington’s traditional allies, U.S. disapproval of the AIIB initiative couldn’t compete with the disadvantages of sitting out the new enterprise.
Construction companies and suppliers promoted by non-partner governments, for example, will have much less chance of winning the hundreds of billions of dollars worth of bids for AIIB-funded infrastructural projects. For ailing economies like Britain, France, and Japan, the possibility of being sidelined from juicy contracts in a period of global stagnation was simply too awful to contemplate.
Australian Treasurer Joe Hockey was candid about how his country’s commercial links with China trumped its traditional friendship with Washington: “The United States understands that this is a bank that’s going to be operating in our region,” he said. “It’s going to be using contractors in our region. We want Australian contractors involved. We want work for Australians out of this bank.”
The US Congress is partly responsible for China’s move to create a separate financial center, arising out of its belief that every nation should grovel before the US and follow its dictates. They opposed giving China greater voting power in the World Bank and the IMF, despite the obvious reality that China is now a major economy and a global power, and this is what has resulted.