The latest popular addition to the alphabet soup of global financial institutions is the AIIB, slated to begin operations this year. Be thankful for this abbreviation as it stands for Asian Infrastructure Investment Bank. Drink three Old Fashions (made with JD) and then say Asian Infrastructure Investment bank 17 times while doing 11 burpees. See what I mean? AIIB is much easier. The name, however, is misleading and the new politics it brings is even stranger. Like not knowing which branch of Islam is the good one, understanding AIIB can be pretty confusing.
The first confusion is the term Asian. Calling this bank Asian is like calling any team with LeBron James something other than LeBron. Cleveland Cavaliers? Really? The AIIB should be called China and her friends. China will be the main stockholder despite being joined by almost 30 other countries. Key US allies are now trying to decide whether or not to join including Australia, Japan and South Korea. Britain, Germany, France and Italy have also promised to think about joining. The objective of the AIIB is to provide project loans to developing countries. These loans will focus on building infrastructure.
Since it will have representatives from all world regions it is hard to call this bank "Asian". AIIB is another Chinese development bank. Since the US sponsors similar world financial organizations with names like the World Bank and the Asian Development Bank (ADB), everyone knows these institutions are very much dominated by the US. Thus you can see why the US is concerned when so many countries jump on China’s latest bandwagon. Are these countries with us or China? This reminds me of the grammar school basketball court when my team was unable to recruit the tall agile kid. The US feels threatened.
We are hearing a lot about the AIIB mostly because we worry about our basketball team. No not really. Some US officials are worried that the AIIB will somehow steal our luster. But the truth is that worrying about the AIIB and China is a lot like worrying that the new handsome kid at school is wooing your girlfriend – when the truth is that she was about to dump you anyway.
Think about how we in the US sometimes think about the World Bank and and ADB. "There they go again -- giving away our hard-earned money to creepy countries filled with graft, corruption and people who continue to insist on speaking foreign languages." Yes, we are sometimes very upset that our money is not used more successfully by foreigners who rarely send a thank-you card. Or who sometimes forget to pay us back what we are owed in full. We should be thanking China for risking their renminbi in these same places rather than our dollars.
You are not convinced. You are worried that China will be better at this game than we are. You are worried that China will not only help these countries invest development funds more wisely but these other countries will then be so appreciative so as to shower their new Chinese friends with bouquets of Plum Blossoms and endless deep tissue Swedish massages. China and these developing countries will then skip off into the horizon holding hands and singing songs about Mao Tse Tung.
But think about it a minute or three. First, China is facing difficult economic challenges. Their own development plans have floundered and growth is barely half of what it used to be. And even with all the past China Kudos, the average person in that huge country earns in a year about what the average American earns in 6 weeks. Okay China has some money to lend. But please – if the money comes with Chinese advice or partnership, are we really worried about competition from them?
Second, let’s get back to the girl who wants to dump you. We are less than appreciated by many developing countries. Why? We are nice guys and we look really good in Levis and yoga pants! One reason we are not fully appreciated is that they don’t always like our advice. It’s like when Mummy tells you to do your homework before you go online to Addictinggames.com. Or when Frau Merkel lectures Alexis Tsipras on financial management. When YOU want a loan you don’t appreciate the banker telling you how to spend it. These countries often do not like the US advice that comes through world financial organizations.
So she might dump you because she doesn't appreciate your advice. But the final point is to wonder why you liked her to begin with. Okay she has blue eyes and she dances like Madonna – but maybe she just isn’t your type. Look around the world. Developing countries are not doing well financially and in many cases once prospering countries replaced past rulers with “democratically” elected dictators. Do you prefer to dance with Cuba or Argentina? Columbia or Haiti? Maybe getting dumped isn't such a terrible thing. Buck up Charlie.
The bottom line is that some of these developing countries are dubious candidates for our affection. If China wants to lead a brigade of unsuspecting lenders to steal the affection of the developing world it might help to notice that China has little to help them with and the developing countries have little promise to improve. If we are really worried about China then we should be gleeful about the fact that the AIIB will both weaken China, its partners, and all those politically delinquent countries who seem quite unhappy with US help. It is okay -- you may now do a happy dance.