Western aid model takes on Chinese characteristics (updated)

It seems as though the ‘Western’ aid model is suddenly being reset, as the article below indicates. Instead of the long-standing method of bribery, in which cash was handed over subject to social, political and economic changes in the recipient country, they are now starting to fund infrastructure. Who would have thought? This is starting to draw near to the Chinese approach, with one caveat: ‘Western’ countries still need to learn that they cannot interfere with the sovereignty of other countries. Of course, they have seen how well the Chinese approach works and that it is favoured by the majority of countries around the world (wherever you look a Chinese infrastructure project is underway). But these ‘Western’ countries still have a very long way to go.

This is a recent article on the topic from The Global Times (another item also welcomes the USA’s engagement in infrastructure projects, but also asks whether that weird country will actually deliver):

Australia recently announced plans to set up a A$2 billion ($1.4 billion) infrastructure aid fund for South Pacific nations, which will provide grants and long-term loans to support energy, transport, water and telecommunications projects in the region.

Further, Australia’s export credit agency – Export Finance and Insurance Corp – announced it will offer another A$1 billion to support infrastructure projects and business development in the South Pacific region.

These moves were quickly interpreted by some Western media outlets as a response to “counter China’s growing influence” in the region.

Yet, compared with Australia’s previous attitude toward South Pacific issues, and given the adjustments made by developed countries to their foreign aid, it seems that China’s aid model of respecting recipient countries’ willingness to develop independently has been widely recognized by developing countries. This recognition has also gradually influenced the traditional Western aid system.

Australia’s latest aid plan is in sharp contrast with the comments it made several months ago. In January, Concetta Fierravanti-Wells, the-then minister for international development and the Pacific, told reporters that China was funding unneeded infrastructure projects in the South Pacific, which led to “useless buildings” and “roads to nowhere.”

In April, Julie Bishop, Australia’s former foreign minister, said that her country didn’t want to see development aid turn into a burden on vulnerable economies. Using this logic, it seems contradictory for the country to change its practice of only providing grants while starting to offer long-term loans to South Pacific nations. Australia’s moves are not merely intended to react to geopolitical competition, but also to fulfill the demand of recipient countries.

The policies and practices adopted by countries of the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD) have expanded to include what look like Chinese characteristics.

First, OECD/DAC countries have expanded the scope of development aid from projects meant to improve living standards (for example, education) to infrastructure investment. Western donor countries usually limit their foreign aid on non-production sectors, avoiding industrial projects that might pose competition to their own industries. But this deprives recipient countries of the ability to develop independently and leads to their long-term economic dependence on donor countries.

In comparison, China-funded infrastructure, such as roads, bridges and factories, has enhanced the connection between recipient countries and the world market, thus winning them recognition and prompt Western countries to pay attention to the infrastructure aid they criticized before.

Second, OECD/DAC countries have evolved from offering free aid as they did in the past to a model of providing “grants plus loans.” Since the end of the Cold War, Western countries have attached reform conditions to their financial aid.

Countries that moved toward the reform targets set by the West could get direct cash transfers, which led to excessive dependence of the recipient countries. For this reason, Western countries have to learn from China’s experience to offer preferential loans, so as to push recipient countries to take more responsibility for their own development.

Third, China’s model of respecting recipient countries’ willingness to develop independently has caused some observers to criticize and reflect on the Western development aid model. When drawing up its foreign aid strategy, China fully respects the autonomy of recipient countries in formulating and implementing their own development strategies.

Based on a detailed understanding of the development needs of each recipient country, China revises its foreign aid development plan every five years, making systematic arrangements for medium- and long-term foreign aid targets, the scale of investment, capital structure, key areas and safeguards. Aid guidelines of these countries are also formulated every five years to develop specific foreign aid policies that suit the recipient countries’ economic and social development plans.

During the preparation and implementation of aid projects, China also communicates closely with all interested parties in recipient countries to gain a full understanding of their development needs. In contrast, Western countries have long neglected recipient countries’ demand for independent development, and they have attached political conditions to aid, violating the principles of political and economic development.

Beijing’s foreign aid concepts have been different from those of the West from the start, because of China’s semi-colonial experience, its identity as a developing country and its independent, self-driven development.

Since reform and opening-up began in the 1970s, top Chinese officials have repeatedly said that China will respect the independent development of recipient countries in its foreign aid program, without attaching political conditions to its aid. This aid model has won wide recognition among developing countries, and it has also put the development of the Western-led global governance model on a path with more justice and rationality.

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Narratives of Catastrophe

This article was first published in an online journal called ‘State of Nature’. As is the way of online publishing, the journal no longer exists. So here is the article, updated and revised, on narratives of catastrophe:

Reports of catastrophe seem to be all around us. It may be the urgent matter of global warming and environmental collapse, or signs of the decline of the ‘West’, or of refugees flooding the last citadels of liberal democracy, of the Eurasian integration of China and Russia, or indeed the culmination of United States democracy in President Trump. Some catastrophes come and go, while others remain with us.

However, if we look a little closer at the way these stories are told in many parts of the world, they seem to follow some familiar patterns. The imminent catastrophes might be new in some way, but the shapes of the stories are certainly not. I like to call them the narratives of Noah, Jonah and Repentance – especially in cultures influenced in complex ways by the Bible.

The Noah Story

Let me use as an example the most consistent picture of catastrophe: climate change and environmental destruction. Despite the desperate efforts of the climate change deniers, the scientific evidence is overwhelming. We have overused the earth’s resources; in fact, thinking about the earth as a ‘resource’ is part of the problem. Since the industrial revolution, the parts per million of carbon in the atmosphere have risen to dangerous levels through our thirst for fossil fuels. We have been encouraged to consume more and more, or at least those in the rich third of the world have. Needs we never thought we had have suddenly arisen, encouraged by the propaganda (advertising) industry. We use too much water, too many plastics, we fly too much, drive too much, eat too many processed foods. Our demand for ‘energy’, produced by heavy-polluting power stations, grows and grows. And when it gets hotter and hotter we simply turn the air-conditioner up. Our ‘carbon footprint’ is far too high.

The scenario here is as grim as it can get. Large-scale extinctions are already under way, clean water for human beings becomes increasingly scarce, crops begin to fail in areas that have been until now the bread-baskets of the world, low-lying coastal cities (the major commercial centres) go under water as the sea rises, diseases we never have seen become rampant, increases in starvation follow, the Greenland ice-cap melts, the Arctic becomes ice-free in summers, large chunks of the Antarctic ice shelf break away, the Gulf Stream stops and northern Europe freezes up, extreme weather events increase, such as storms, floods, and cyclones, the tropics extend their reach into temperate zones, the deserts grow, and life itself faces its biggest challenge.

But how is this story often told? One form is drawn from the age-old structure of the biblical story of Noah. Told of a coming catastrophe (the Flood) some years in advance, Jonah sets about building a massive boat according to a divine blueprint. His neighbours laugh and mock and his family thinks male menopause has addled his brain. But Noah keeps building. When the catastrophe does arrive in the form of torrential rain and subsequent flooding, Noah manages to ensure a remnant makes it onto the ark, two of some species, seven of others, as well as his own family. Eventually the floods subside and the ark finds a resting place in order to start life again (except for the fish who have done rather well).

More than one account of our impending doom has invoked this story form. The occasional Hollywood catastrophe film (meteorite strike, space invasion, monster storm and what have you) has its own version of the Noah’s ark story. Indeed, there is an environmental organisation called ‘Planet Ark’, focused on the planet as a whole, whole some in the environmental movement have called on this story as a means for ensuring some species survive.

An excellent example of the use of the Noah narrative is the ‘Survivalists’, a loose movement that shares the same basic assumptions. For them the arrival of Peak Oil and the catastrophic effects of global warming will mark the end of society as they know it. They buy land in remote areas that will be least affected by global warming, learn to become entirely self-sufficient, and seek to free themselves from oil dependence. However, this is not a collective act, done for the good of everyone. Instead, it is a retreat from the masses, a move to ensure that they will survive, even if everyone else will not. So they stockpile weapons and ammunition to protect themselves from the starving, dispossessed hordes that will soon be raiding their land looking for food and shelter. In other words, they seek to build their own ‘arks’ for the coming deluge and will fight off anyone who might want to join them uninvited.

The Jonah Story

Another version is what may be called the Jonah story, a title I draw from the biblical book of the same name. In that wonderful fictional novella Jonah is called by God to go and preach doom and destruction on Nineveh (in present-day Iraq). Jonah is less than impressed by the job description and heads in precisely the opposite direction, boarding a ship, incognito. But God is not going to let him get off the hook so easily, so he follows Jonah, brings on a great storm (as gods tend to do) and then forces him to admit to the crew that he is a prophet fleeing a less than attractive commission. They promptly toss him overboard, the storm ceases but a great fish swallows Jonah, swiftly gives him submarine passage to Nineveh and spits him out on the shore nearby. Properly pissed off by now, Jonah decides to let Ninevites have it. He strides about the city, crying out with great relish that the end is nigh, that they have only days left. Then he takes himself to a hill and finds a comfortable spot to watch the fireworks.

So also do the Jonahs among us take grim satisfaction in telling us that the world is coming to end and that there is nothing we can do about it. No-one will change, they say, people will keep on consuming far more than they should, species will keep becoming extinct, and armies will be deployed to turn back those who come hammering on the gates of the wealthy nations. No one will in fact repent, people have brought this catastrophe on themselves, so damnation to the lot of them. Like Jonah, they preach destruction to an evil generation who will not change. Catastrophe is coming, so we had better get ready for it.

Call to Repentance

Apart from the Noah and Jonah narratives, a third approach involves repentance. Indeed, the purpose of the narrative itself is to call for repentance. In regard to the environment, one book after another, or one film or documentary after another, calls on us to repent of our destructive ways. We are to assess and reduce our ‘carbon footprint’, or find eco-friendly ways to live, whether growing our own vegetables, showering less, buying carbon offsets, or indeed walking, cycling and taking public transport. Or in the case of fossil fuels, repentance requires giving up our addiction to coal and oil and finding some other energy source, whether bio-fuels, or power from sun, wind, tides and hot rocks beneath the earth’s crust. All that stands between us and redemption is a great push for innovation. If we act now and change our ways, we can still save the planet from its doom.

By now it will be clear that this narrative of imminent doom and the call for repentance is by no means new. Warn your audience of the dire consequences of their acts and call on them to change before it is too late. It was and is the favoured mode of fire and brimstone preachers, warning of torments of eternal punishments in hell should we not repent and amend our ways. I wonder whether this is the most effective way to tell the story.

Another Narrative?

What are we to make of these stories? Some will point out that they are mere fictions, scary doomsday scenarios that we should really ignore, for they are no different from many similar prophecies of the end throughout human history. The problem with dismissing these stories is that doing so denies the wall of scientific analysis which shows that climate change is a reality.

Here I want to stress that both the way we choose to tell the story and the reason we do so are as important as the story itself. I must admit that I have indulged in the Jonah narrative from time to time, telling myself it is the most realistic of the lot. People will not change, capitalism will keep ploughing on in its destructive path and so a grim forecast is the best approach. Assume the worst and then anything looks like an improvement. The Noah narrative is as grim although more individualistic and selfish. Once again, it claims to be realistic for much the same reasons as the Noah narrative but then says, ‘stuff the rest, I’m going to save myself’. As for the Repentance narrative, we need to ask, repentance for what? Is it to keep our current system staggering along with a few bandages and splints? Then I am not interested. Or is it a wake-up call to change an economic system that has led us to this point? Then I am more interested.

At least two features are necessary for such an alternative. The first is that the socio-economic conditions of all human beings – not just a privileged few – should be improved to a moderate level. If this entails that those accustomed to much need to do with less, so be it. When people no longer have to worry about adequate food, shelter and clothing, then the environment benefits.

The second is that it requires a strong state with consistent policies to bring about such change. Advocating changes in individual behaviour never works. A consideration of the history of religions is instructive in this point. Why is it that Eastern Orthodoxy dominates today in Eastern Europe and Russia, while Roman Catholicism is characteristic of the south-western Europe and Protestantism in north-western Europe, if not in areas they colonised? In the past, rulers decided and enforced their decisions. Why did Buddhism become a Chinese, Japanese and Korean religion, as well as an Indian one? Again, because rulers enforced and fostered it, so that Buddhism took on local features. So also with socio-economic systems and their cultures. Human beings will act within frameworks provided. And if the framework changes, so will human ways of being in the world.

Does this sound like a prescription for dictatorship? If we think of individual dictators, of course not. But if it is a collective dictatorship, a democratic dictatorship exercised by the vast majority, then yes.

Chinese attitudes to life and economics

Despite all that has been written about the economic powerhouse that China is becoming, the basic approach to life and economics remains largely the same. A recent survey of Chinese women produced the following results:

65.23% subscribe to ‘jianku pusu, jingda xisuan’: a hard and simple life requires careful calculation and strict budgetting.

19.45 % prefer ‘meiyou jihua, suibian hua’: random spending without plan.

11.19 % follow ‘sheng duoshao, hua duoshao’: spend as much as you earn.

Only 4.13 % are comfortable with ‘daikuan xiaofei’: getting a loan to consume what you want.

A different perspective on Belarus

I have been reading with much interest Grigory Ioffe’s Understanding Belarus and How Western Foreign Policy Misses the Mark (Rowman & Littlefield, 2008). Clumsy title, I know, but intriguing book. He deals with post-1991 Belarus, on language, independence, identity, economy and politics. Most intriguing is the treatment of the economy. If we are to believe the corporate media, if not economic ‘experts’, Belarus’s economy should have collapsed ages ago. Yet, throughout the 2000s the Belarusian economy actually grew, achieving 9.9 percent growth in 2006. How is this possible, especially in light of sanctions against Belarus? The country refused to undergo the ‘shock therapy’ imposed (and enthusiastically embraced by those who stood to gain) in neighbouring Russia, Ukraine and other parts of the former Eastern Bloc. The initial move to privatisation was blocked, with the aim of developing a ‘socially oriented market economy’. Thus, all of the main enterprises remain in state control, with only a quarter of the economy in private hands. Most Belarusians simply saw no sense in squandering the significant industrial base that had been built up during the USSR, as they also saw no sense in destroying universal health care, education and so on. Life had been steadily improving for decades, so why change it now? But did they really rely on Russian subsidies? Ioffe points out that Belarus has one of the most open trade policies, especially for its industrial products.

What about Alexander Lukashenka, who was first elected as president in 1994? The demonizations are myriad: ‘authoritarian cesspool’, ‘outpost of tyranny’, ‘bastard of Europe’ and the usual ‘last dictator or Europe’. Yet, Ioffe convincingly shows that Lukashenka consistently has widespread popular support. He admits that a few extra votes may have appeared from somewhere, but even without them, observers admit that he would have won the presidential elections anyway. So what is his secret? He is of humble rustic origins, speaking in the way of normal people (before he became president, he was the director of a collective farm). He has also presided over steady economic growth that is agreed to be socially equitable, which even more remarkable given international efforts to ruin the economy. And he stands up for Belarus when needed (for instance, during the Russia-Belarus trade war of 2006-7). The intelligentsia hates him, mocking his mode of speech and his policies, but above all for depriving them of the power they feel is their birthright. By contrast, Lukashenka has an uncanny ability to sense what common people are feeling. As one of them put it, he is ‘our Sashka [an affectionate diminutive]; people have a gut feeling that he is their man’.

On the international division of labour and the invisible hand (-shake of corruption)

Alain Lipietz again:

Ricardo and the supporters of the Heckscher-Ohlin-Samuelson theorem seem, for instance, to believe that the international division of labour is the result of some world conference at which brilliant economists explained to an admiring gallery of politicians that – given relative levels of productivity, collective preferences and the initial endowment of factors – the free play of market forces would ensure the optimal division of production, and that each participant then went home convinced not only of the virtues of free trade but that the law of comparative costs ensured that the lot that had fallen to his or her country was quite justified, and that they could therefore force it to adopt the requisite specialization.

The problem with all of this is of course – now with a turn to Adam Smith – that the ‘invisible hand of the market’ is actually ‘the invisible handshake of corruption or the eminently audible boots of the military’.

Lipietz, Miracles and Mirages, pp. 16-17.

Crossing the stream by feeling each stone with one’s feet

How does a socialist state negotiate its way within global capitalism? It feels each stone on the bed of the stream with its feet before proceeding (as Deng Xiaoping out it). Let me give a few examples, drawn from Adrian Chan’s Chinese Marxism. Each of them provides a partial answer as to why China did not suffer any great pain with the Asian Economic Crisis of the late 1990s and now the Atlantic Economic Crisis that began in 2008. (Another part of the answer is, of course, the massive integration of the economy and the government in what some may call a planned economy, but what is perhaps better called a ‘focus-field’ system.)

An indication may be found already back in the early 90s. In 1993, inflation was running at 25%; by 1997 it was 2%. At the same time the economy ‘grew’ by that steady average of 8-9%. How was this managed? Instead of ‘opening’ the economy up to international speculation and competition, China retained control of its currency and the exchange rate, thereby protecting itself from the ravages of the international money market. Even now, the government refuses to make the currency fully convertible – much to the fury of regimes such as the USA. The result is that the state retains fiscal control and yet encourages enterprises, both local and international, to prosper and survive and thereby reduce inflationary pressure.

A similar level of control over the currency took place during the Asian Economic Crisis of the late 1990s. Despite the fact that most of the other currencies in South-East Asia did plummet, and despite the threat of Moody’s to downgrade the credit ratings of China and Hong Kong, the government refused to devalue. Why? One reason put forward was that China was thereby helping the struggling Asian economies to get back on their feet, since their exports were now considerable cheaper. Another reason is that the government was keen to block currency traders and manipulators from attacking its own banks.

Here the successful defence of Hong Kong and China shows how such a policy works. Many Asian countries were attacked by manipulators, forcing the central banks to use their reserves, usually in US dollars, and when they were depleted, to devalue and then be forced to follow the infamous harsh measures of the World Bank and IMF. In August 1997, Hong Kong itself was attacked. China immediately pledged its then considerable reserves of $140 billion (now much higher) to resist. Hong Kong threw in its own $98 billion. The result: after six weeks the attack was called off. The Monetary Authority of Hong Kong, in coalition with the Chinese central bank, had used about $30 billion to defend the Hong Kong dollar. Since that dollar had risen by $0.02, the gain was about $600 million.

Chan concludes: ‘This ability of China’s new socialists to take advantage of the contradictions of the capitalists would probably have been cheered on by Mao’ (p. 200).

Stalin’s economics: the secret to Soviet success in World War II?

What was the deep source of Soviet success during the Second World War? A number of obvious factors played a role, such as Stalin’s leadership, excellent generals, German mistakes, tough discipline, good morale, and deal of luck. But underlying it all, as Geoffrey Roberts points out, was ‘a tremendous economic and organisational achievement’ (Stalin’s Wars, p. 163).

To set the scene: by the time of the Battle of Stalingrad in 1942, the Germans occupied more than half of European Russia, about two million square kilometres. It was an area containing 40 per cent of the USSR’s population, about 80 million people. The occupied area covered 50 per cent of the USSR’s cultivated land, the production of 70 per cent of its pig iron, 60 per cent of its coal and steel and 40 per cent of its electricity. Still, by the end of 1942, the production of rifles had increased fourfold (to 6 million) compared to the previous year. Tank and artillery production increased fivefold to 24,500 and 287,000 per annum. The number of aeroplanes produced more than doubled from 8,200 to 21,700.

How was this possible? Roberts writes that it was due to the mass relocation of Soviet industry to the eastern USSR and out of harm’s way in 1941-2. One of Stalin’s first instructions after Hitler invaded was the establishment of an evacuation committee that arranged the move of more than 1,500 large industries to the east. With them went hundreds of thousands of workers and thereby the single most significant wave of resettlement in Siberia. It is not for nothing that you find cities in Siberia of more than a million people. On top of this, 3,500 new industries were established, most of them related to wartime production. It is no wonder that by the time of the battle of Stalingrad, the Soviets were able to field 90 fresh divisions, fully equipped with new weapons. Or indeed that after losing almost 5 million soldiers in the first months of Hitler’s invasion, they were able to field 11 million the following year. One million of those were women.

Initially, Roberts is in two minds on this achievement. He tends to sit on the fence, relating debates about wartime ‘free enterprise’ versus the planned economy. He mentions western aid (much emphasised in European and American accounts), but points out that it amounted to no more than 10 per cent of the total economy and that it came largely after the dire threat of 1941-2 and after victory at Stalingrad. In the end he comes down on the side of the planned economy. Stalin emphasised the need to keep the armies properly supplied, but otherwise he left the job to his economic managers. And they could do so only by means of ‘the mobilisation power of the Soviet economy’ (p. 163).

But what was that economy? Given the energetic collectivisation of farming in the late 1920s and 1930s and the Five Year Plans of industrialisation and economic transformation, the result was as full a communist economic system as one is likely to find. Does this mean that only a planned, communist economic system could have pulled it off? It seems so.