The New Development Bank and the Asian Infrastructure Investment Bank: China's Ambiguous Approach to Global Financial Governance

The creation of the New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB) has generated a great deal of attention and controversy in the development community and beyond. Do these banks indicate that China is promoting a new model of multilateral development finance that undermines the existing system dating back to Bretton Woods? What are the forces shaping China's policy choices in this area? In contrast to the prevailing tendency to view these banks as part and parcel of the same challenge or opportunity for multilateral development financing, this article highlights major distinctions between the NDB and the AIIB. The fact that China is playing a prominent role in both the NDB and the AIIB suggests that China is not promoting a coherent new model of multilateral development financing, but is instead straddling different traditions in this realm of global financial governance. The ambiguity in China's approach to multilateral development finance is shaped by its multiple identities and complex economic and political interests.     

Can South–South Cooperation Compete? The Development Bank of Latin America and the Islamic Development Bank

Southern‐led multilateral development banks (MDBs) play a key role in harnessing global capital to finance the sectors most important to borrowers, especially infrastructure. Two prominent Southern MDBs, the Development Bank of Latin America (CAF) and the Islamic Development Bank (IsDB), have become crucial drivers of regional infrastructure growth. This article explores whether their performance has lived up to their goals of establishing borrower control over bank governance without sacrificing financial dynamism. Using power‐weighted voting indices for member representation on bank boards, the authors determine that these banks offer borrowers much more representation on their boards than do their Northern‐based counterparts, the Inter‐American Development Bank (IDB) and the World Bank International Bank for Reconstruction and Development (IBRD). The article also analyses bank operations to determine whether their governance structure impacts their internal performance, as reflected on balance sheets, and external performance — gaining relevance in development finance and particularly in infrastructure lending, including the burgeoning sector of sustainable (climate‐resilient) infrastructure. The authors find that the CAF and IsDB have become major players in development finance, including in sustainable infrastructure. However, important issues remain in relation to their continued internal capacity development, especially with regard to the environmental and social safeguards necessary to oversee lending.     

Soft balancing against the US ‘pivot to Asia’: China’s geostrategic rationale for establishing the Asian Infrastructure Investment Bank

The existing accounts about the China-led multilateral development bank—the Asian Infrastructure Investment Bank (AIIB)—have focused on the USA’s policy concerns and the economic and commercial reasons for China having established it. Two deeper questions are left unaddressed: Was there any strategic rationale for China to initiate a new multilateral development bank and, if so, how effective is China’s strategy? From a neorealist balance-of-power perspective, this article argues that China has felt threatened by the Obama administration’s rebalance to the Asia-Pacific strategy. In response, China is opting for a soft-balancing policy to carve out a regional security space in Eurasia in order to mitigate the threat coming from its east. China’s material power, premised on the fact that the country is a huge domestic market and flush with cash, has proved irresistible for Asian states, with the exception of Japan, to be enticed away from the USA. On the one hand, this article adds weight to the claim that although the USA remains the pre-eminent military power in the Asia-Pacific, it has fallen into a relative decline in regional economic governance; on the other, China’s soft balancing has its own limitations in forming like-minded partnerships with, and offering security guarantees to, AIIB members. A China-led regional order is yet to have arrived, even with the AIIB.     

International development in transition

International development is in a period of transition. While the outcome of this is still unclear, this article argues that there are at least four areas in which the project of international development is changing. First, there is a debate, especially within the World Bank, about development strategy and how we think about development, particularly in terms of the balance between states and markets. This is evident in the debate over state failure and the new structural economics. Second, there is increasing evidence of a shift in lending, away from projects of ‘small’ human development, perhaps best encapsulated by the United Nations Millennium Development Goals, towards more transformative ‘big’ development projects such as infrastructure. Third, ‘non‐traditional’ aid donors and new forms of private philanthropy are playing a more significant role in development financing and this, in turn, offers developing countries a new range of choices about what kinds of development assistance they receive. Fourth, aid relations are changing as a result of the renewed agency of developing states, particularly in sub‐Saharan Africa, and shifts towards increased South–South cooperation are growing as evidenced by increased funding from regional development banks and increased trade flows. The article reviews these changes and suggests a series of questions and challenges that arise from them for analysts of international development, developing countries and traditional aid donors.     

Remaking the architecture: the emerging powers,self‐insuring and regional insulation

This article examines the interaction between the emerging and traditional powers in global governance reform, and asks whether we are heading towards an international financial system that is more fragmented, where power is more diffused and national and regional arrangements play a more prominent role, at the expense of global multilateral institutions. It begins with a brief discussion of the global systemic and country‐specific factors that motivate Brazil, China and other emerging countries to accumulate large currency reserves. We find that national arrangements for managing financial and currency crises will continue to hold sway for emerging countries in the wake of the global crisis. However, the actual capacity of regional arrangements in managing future financial crises is uncertain, and the significance of regional alternatives in the emerging architecture should not be overstated. The real capacity of East Asian regional arrangements to manage financial crises, payments problems or currency attacks is still untested, and key thresholds in multilateralization still lie ahead. In South America, multilateral lender‐of‐last‐resort support inside the region is largely confined to the sub‐regional level and is limited by Brazil's reticence. Enduring reliance on bilateral measures for financial crisis management is noted. Where there has been progress in regional solutions, since the global crisis, has been in the role of regional development banks in providing financing for developing countries to enact counter‐cyclical policies. Such support also provides insulation for states in the region against the contagion effects of international financial crisis. We are in the midst of transitioning to a more diverse and multi‐tiered global financial and monetary system. A reformed IMF could have a role to play in addressing global imbalances and encouraging a shift from national reserves to collective insurance, however, it would be preconditioned by significant shifts in the policy, lending operations, and internal governance of the Fund, and willingness among the G20 to strike a new consensus on how to deal with imbalances, and new accommodation on acceptable reserve levels.     

The Movement, modernity and new International Relations writing in South Africa

Books reviewed in this article:
Korwa Gombe Adar and Rok Ajulu, Globalization and emerging trends in African states' foreign policymaking processes: a comparative perspective of Southern Africa.
Patrick Bond, Against global apartheid: South Africa meets the World Bank, IMF and international finance.
Greg Mills, The wired world: South Africa, foreign policy and globalization.
Philip Nel, Ian Taylor and Janis van der Westhuizen, South Africa's multilateral diplomacy and global change: the limits of reformism.
Ian Taylor, Stuck in middle GEAR: South Africa's post–apartheid foreign relations.     

Blurring the Borders. How the Central Banks of the European Neutrals During the First World War Became Part of the State Machinery: Examining the Case of Norway

Abstract

This article analyses the relationship between the central banks and governments in the neutral countries during the First World War, with focus on the Norwegian development. It examines how independence was challenged, and the framework is a concept of central bank independence, which regards non-lending to the state as vital to the functioning of the central banks. This is a novel approach to the development during the war as the perspective has barely been discussed in the literature in Norway, and also seems to be disregarded in the standard international literature on central bank development. From this perspective the article argues that the Norwegian central bank’s pre-war independence was substantial compared to other central banks. Moreover, the distinct borders between central bank and government also safeguarded Norges Bank’s autonomy longer than in comparable countries after the outbreak of war. However, by the end of the war, Norges Bank had become one of the neutral central banks most interwoven with the state. Based on the historical development in different countries, the article questions the notion of the standard literature that lending to the state in a crisis was a central bank duty.     

Can the World Bank Enforce its Own Conditions?

In the 1980s, the World Bank stepped up policy‐based lending, making loans conditional on government policy and institutional reforms in the borrower country. In 2002, policy‐based lending (or adjustment loans) accounted for 64 per cent of total commitments. Some critics have argued that conditionality has failed because borrowers do not comply with conditions, and that borrowers do not comply because donors do not enforce the conditions, due to their own institutional incentives to lend. Accordingly, they argue that conditionality should be abandoned in favour of selectivity, a strategy in which donors would lend to governments that already have good policies and institutions in place. This article reviews the evidence that has been offered for this ‘enforcement critique’ and finds that it is not sufficient to support the argument. Although the critique is often asserted, and although there is ample evidence of lending pressures, no studies have attempted to determine whether borrower non‐compliance is a serious problem, or whether Bank failures to enforce are the principal reason for the failure of borrowers to meet conditions; nor have any studies been carried out to show whether lending pressures are the main reason for the Bank's failure to enforce.     

Civil society and public–private partnerships: case study of the Agri-FoodBank in South Africa

In recent decades, civil society organizations (CSOs) have joined public–private partnerships (PPPs) to reduce poverty and promote local development. In what follows, I analyze the development of the Agri-FoodBank (AFB) CSO in South Africa in order to critically examine PPPs. As part of the FoodBank South Africa (FBSA) network of food banks, the AFB has emerged to reduce rural and urban food insecurities. Building on the national system of food banks, the AFB aims to train small-scale rural farmers to sell their crops to the food bank’s network of local food organizations which then feed the urban poor. In the case of the AFB, findings suggest that the PPP emerged as a mutually beneficial collaboration between the state and FBSA, as the state needed political power and FBSA needed money. However, for this PPP to form, FBSA completely transformed its mission and structure to fit the state’s preference for rural development projects. Thus, although the AFB formed to empower FBSA, data findings indicate that the AFB has increased state control over FBSA. In this way, PPPs need to be understood within the context of local state-civil society relations, as methods of state control reflect South Africa’s unique version of neoliberalism.     

The contradictory logic of global ecosystem services markets

Commodification and transnational trading of ecosystem services is the most ambitious iteration yet of the strategy of ‘selling nature to save it’. The World Bank and UN agencies contend that global carbon markets can slow climate change while generating resources for development. Consonant with ‘inclusionary’ versions of neoliberal development policy, advocates assert that international payment for ecosystem services (PES) projects, financed by carbon-offset sales and biodiversity banking, can benefit the poor. However, the World Bank also warns that a focus on poverty reduction can undermine efficiency in conservation spending. The experience of ten years of PES illustrates how, in practice, market-efficiency criteria clash directly with poverty-reduction priorities. Nevertheless, the premises of market-based PES are being extrapolated as a model for global REDD programmes financed by carbon-offset trading. This article argues that the contradiction between development and conservation observed in PES is inevitable in projects framed by the asocial logic of neoclassical economics. Application in international conservation policy of the market model, in which profit incentives depend upon differential opportunity costs, will entail a net upward redistribution of wealth from poorer to wealthier classes and from rural regions to distant centres of capital accumulation, mainly in the global North.     

Urban heritage ‘space’ under neoliberal development: a tale of a Jordanian plaza

What happens when urban heritage spaces within developing countries, such as Jordan, are subject to touristic development funded by international bodies, such as the World Bank? This question is explored theoretically and practically by considering a popular local plaza in the secondary Jordanian city of Jerash that has been subject to three tourism development projects funded by the World Bank. The study, which incorporates and critiques the discourse of neoliberalism within urban heritage development studies, seeks to analyse the World Bank projects and, more specifically, how they have defined, approached and produced outcomes in the Jerash plaza and its context. In so doing, the study triangulates the analysis with accounts by local respondents that identify major drawbacks in the World Bank approach, particularly its emphasis on conventional ‘readings’ of urban space that highlight universal values and histories, while neglecting and marginalising local values and understandings. The triangulation offers attentive ‘readings’ of the plaza as a place understood and experienced by a people. The challenge is to break with the neoliberal paradigm that dominates urban heritage development programmes (and their associated West–East dualisms and top-down approaches) by presenting local sociocultural and economic contexts as assets to enrich development projects, rather than obstacles to be ‘fixed’ and ‘fitted’ for tourism.     

Multilateral Development Finance in Non‐Western Thought: From Before Bretton Woods to Beyond

Recent initiatives of China and other emerging powers to create new multilateral development lending institutions (MDLIs) are often portrayed as efforts to build upon and/or reform an idea pioneered by Western officials during the Bretton Woods negotiations. However, recent literature has shown that support for MDLIs also had deeper non‐Western roots in the pre‐Bretton Woods era. What led thinkers outside the West to propose MDLIs in that earlier period? How might their ideas be relevant to current non‐Western initiatives to create new MDLIs? This article addresses these questions with a special focus on the ideas of China's Sun Yat‐sen (1866–1925) and Peru's Víctor Raúl Haya de la Torre (1895–1979). Although their intellectual journeys were quite distinct and their specific proposals differed, these two thinkers advocated the creation of MDLIs for similar reasons that stemmed from their anti‐imperialist sentiments. Their ideas find some echoes in current non‐Western initiatives.     

The dual Green Revolutions in South Korea: reforestation and agricultural revolution under the authoritarian regime

In South Korea, the Green Revolution has been commonly understood as the development and dissemination of new rice varieties ('Tongil' rice) and the rapid increase of rice yield in the 1970s. However, revolutionary success in agriculture was not the only green revolution South Korea experienced; another green revolution lay in the success of reforestation projects. In the 1970s, South Korea's forest greening was closely related to its agricultural revolution in several ways. Therefore, South Korea's Green Revolution was an intrinsically linked double feature of agriculture and forestry. This two-pronged revolution was initiated by scientific research - yet accomplished by the strong administrative mobilization of President Park Chung Hee's regime. The process of setting goals and meeting them through a military-like strategy in a short time was made possible under the authoritarian regime, known as 'Yushin', though the administration failed to fully acknowledge scientific expertise in the process of pushing to achieve goals.     

‘Minilateral’ Development Banks: What the Rise of Africa's Trade and Development Bank says about Multilateral Governance

Multilateral development banks (MDBs) are one of the most popular forms of international organization, with at least 27 operating in the world today. Although most academics and policy makers focus on the World Bank and major regional MDBs, the majority of MDBs are in fact relatively small, and controlled by developing as opposed to industrialized countries. How do the differing governance arrangements of these ‘minilateral’ development banks (MnDBs) impact their operations? This article takes the Trade and Development Bank (TDB), an MDB in Africa with 22 regional member countries, as a case study to consider this question. Based on an analysis of TDB's track record since 2005 and interviews with management and shareholders, the author finds that borrower‐led governance leads to substantial disadvantages in terms of access to finance. Borrower‐led governance permits TDB and other MnDBs greater operational flexibility, which partially compensates for this financial disadvantage, but these operational strategies come with trade‐offs in terms of developmental effectiveness. The findings suggest that MnDBs have substantial latent potential and, in an increasingly multipolar world, they are likely to grow in coming years. However, MnDBs need to ensure that their developmental value added is strengthened in step with their financial power.     

Brazil's Amazon Fund: A “Green Fix” between Offset Pressures and Deforestation Crisis

Emissions trading and nature-based solutions, particularly REDD+, have lent themselves to the critical literature on the “socioecological fix” in neoliberal capital accumulation and state regulation. Prone to reversals, land conflict, and leakage, these mechanisms displace the burden of carbon emissions reductions to global South countries, promote new green commodities, and thus increase rather than curb the chance of capital accumulations by big polluters. Studies of existing REDD+ projects register the privatisation of forest management on the one hand and “aidification” on the other, suggesting impediments to fully commodifying forest carbon ranging from social movement resistance to technical issues. This case study of Brazil's national Amazon Fund points to global South protagonism in constructing and negotiating REDD+, challenging Northern and market hegemonies. Progressive Southern actors use the political space of the fix to defend rural communities' territorial rights and demand resources in line with historic responsibilities and climate justice.     

The Cold War,the developing world,and the creation of the International Atomic Energy Agency (IAEA), 1953–1957

This article argues that the creation of the IAEA (1953–1957) was shaped by the overlapping dynamics of superpower relations, decolonisation, and the growing influence of the ‘global South’ in the United Nations. During the four years of multilateral and international negotiations, many of the developing countries argued that the new organisation should not exacerbate global inequalities, practice discrimination, or institutionalise ‘atomic colonialism’. While American-Soviet understanding during these negotiations was at times strikingly good, the uranium-producing states and the future recipients of IAEA technical assistance often faced each other as rival blocs. The article is based on multi-archival research at the IAEA and the UN, as well as at the National Archives of the United States, the United Kingdom, and South Africa.     

United States Policy Toward the Multilateral Development Banks

During its first several decades, the World Bank operated with few constraints on its lending authority. Lending policies reflected primarily the economic and political objectives of Bank management and staff. With the establishment of the International Development Association (IDA) soft loan window 1960 this autonomy began to erode. The funds needed to support the IDA soft loans had to be replenished. This opened the door to greater political pressure on Bank policy by the administration and Congress. Since the mid-1980s environmental interest groups increasingly have been effective in bringing pressure to bear on World Bank and other MDB policy.     

Italy and the World Bank: The European Foundations of Development Lending, 1947–51

Foreign financial assistance for economic development and the discipline of development economics have traditionally been associated with US Cold War policy toward the Third World. This article, however, suggests that these practices were also shaped by the experiences of foreign aid for European reconstruction after the Second World War. The article traces loan negotiations between the World Bank and the Italian government, and argues that this process played a substantial role in shaping not only the World Bank's lending policies, but also the way its staff understood the institution's mission. The article emphasises Europe's significance as a site in the early history of development, suggesting new ways of understanding the evolution of development ideas, practices, and institutions after 1951.     

Economic neutrality during the Cold War: the World Bank,the United States,and Pinochet’s Chile, 1973–1977

This paper reconstructs the unknown Chile-World Bank interactions during the formative years of Pinochet’s dictatorship (1973–1977). Prevalent understandings of the WB portray it as a loyal Washington ally. However, new evidence from the WB Archives and additional documents reveal that US efforts to make lending contingent on human rights considerations, thereby forcing the Bank to abandon its so-called economic neutrality, were only partially effective. Pinochet’s case provides a new prism to examine the cold war in Latin America and the Bank’s use of its ‘neutrality’ as a means to reach increasing autonomy from its strongest member states, mainly the United States.     

Science and Technology at the World Bank, 1968–83

The World Bank was an important supporter of science and technology during the period 1968–83. President Robert McNamara’s poverty oriented strategy created challenges that led to technological research, technology assessment and technological innovation in agriculture, forestry, civil works construction, sanitation, and many other fields of development. The Bank also pioneered in financing governmental mechanisms to stimulate industrial innovation. On the other hand, its support to science and technology was limited by lack of an overall policy and systematic support from top management, as well as by cumbersome procedures designed for large infrastructural projects. Even so, its financial independence, its strong leadership, its experienced and non‐political technical staff, and its ability to scale up successful innovations through its project lending, made it an important promoter of appropriate technology in the developing world.