The importance of One Belt One Road

di 🇬🇧 Alberto Bradanini pubblicato il 28/09/16

Riportiamo di seguito il key-note speech "on credit economy that deepens international cooperation" tenuto dal presidente del Centro Studi sulla Cina Contemporanea, Alberto Bradanini, il 27 febbraio a Yinchuan (Cina), durante il Forum on credit system along the Belt and Road

1.
I congratulate the organizers, the Authorities of Ningxia Province and the city of Yinchuan for this conference, and I am grateful for the opportunity to provide my humble contribution.
One Belt One Road is an innovative strategy based on connectivity, cross-border capital flow, people to people exchanges and much more, a historical occasion for the economies of China, neighboring and distant countries. If it is to achieve its goals, and strengthen peace and stability, this project must be a win-win undertaking, bringing benefits to China and all the Nations involved.
Because of the size of investments and the weight of the countries concerned, OBOR also offers a unique opportunity to question some aspects of the international economic order that need to be changed, for a better and more stable world.

 

2.
Some information and general purposes of OBOR are known. But we do not have yet a list of projects, with economic and social impact, methods of financing, and entities to be involved. A thorough clarity of priorities would trigger a larger response from international and local communities, especially small enterprises in participating countries.
An another issue seems to me crucial: the wealth produced should be fairly distributed among people, with the aim to raise the living standards of the majority of populations. It is now evident that the lesson of the severe 2008 world financial crisis has been ignored. The financial system has remained the same. The international economic order is messy, too much finance in relation to the underlying economic activity. We badly need new structures, a new monitoring system, both independent from private interests.
Small business should be favored, instead of Transnational Corporations, largest financial institutions, monopolies and oligopolies. These groups occupy too much of our economies, and take (or heavily influence) crucial decisions that should be made by Governments. Transnational Corporations have the power, inter alia, to bring down small and medium-sized companies that, in my view, should be those to benefit more from OBOR investments. The whole process should therefore remain in public hands and serve public interests.

 

3.
As for credit, this again should be made more available to sound SME’s, and less to Big Corporations. Public scrutiny is here essential. It is worth reminding that the Big Three rating agencies which had been accomplices of the sub-primes disaster - that in 2008 spread from America to the rest of the world - keep running 95% of the credit rating market. We should have an effective competition and more public supervision. Western governance (now with China’s help) should be able to reduce the oligopolistic advantage of the those agencies, whose behavior has not proven to be neutral. The rating industry needs new models, talents, theories and techniques, and certainly more integrity and transparency.
Opacity is one of the factors that makes the global economy unstable. We need a bold debate with stakeholders, experts and especially people affected by these distortions. This reflection should focus on: 1) first, how to anticipate credit crises, since prevention is better than cure; 2) new principles for setting a different rating system; 3) new models for linking ratings and capital flows; 4) realistic conditions under which credit ratings are incorporated into the world’s economic governance; and finally 5) how to integrate a sound Chinese credit system into the world economy.

The gap between global debt and wealth creation continued to widen. The ratio of global gross debt to GDP was 286% in 2015, from 242 in 2008. This number in the US and Eurozone is even higher (it was 270% in 2008 and 360 in 2015). High public debts are blamed to be the cause of the low growth. But this is not true, the real causes are low public spending and polarization of revenues and wealth, which cuts the aggregate consumption capacity, together with a cultural demotion and intimidation by the ordo-liberalism ideology which has infiltrated so many governments.
It is clear now that the instability of the economy is only surpassed by the instability of the economists (not all, fortunately). In order to meet the parameters of the Washington Consensus (of which the Big Three have been so far a crucial instrument) many European governments keep cutting public spending instead of promoting growth. The European crisis is not a debt crisis but a poor growth crisis. Governments should spend more not less, creating jobs, fostering private spending and distributing the wealth produced in a fair way – both for ethical and economic reasons. By doing that, they would increase GDP and be able to repay their debts.

Some European countries and hefty financial sectors have economic and political interests to protect the system as it is, and quite mysteriously – I dare to add - do not face a strong opposition. If nothing is done, the burst of a new – and likely worst – financial crisis is only a question of time.

 

4.
As for the wealth distribution, I take the occasion to recall what we have tendency to forget. The world runs today an economy in the interest of its most powerful 1%. According to the Oxfam report published in January this year – the world inequality has reached new highs: a bunch of people owns as much as the poorest of the world population. Today 62 individuals (9 are women) own 50% of the world wealth, the other 50% goes to the rest of the world population, that is 7.4 billion people.
World leaders talk a great deal about inequality, in the meantime the gap between the richest and the rest becomes wider (as a result, for instance, every year 1.5 million children die of hunger). Solutions are not simple, we are not naive, but something can be done, now. Governments could start by cracking down on tax evasion, removing offshore havens where wealthy people, Transnational Corporations and big companies (and 9 out of 10 have bank accounts there) hide fortunes estimated at 7.6 trillion $, that could be used to tackle poverty and improve public services. By doing nothing, governments show that they share interests with those people and Corporations.
I wonder whether OBOR could offer an occasion to fight these privileges, for instance by excluding from tendering companies with residency or subsidiaries in offshore havens. This would be a great signal to the world peoples, for a healthier global governance.
We need an economy with a moral dimension, that would promote the wellbeing of our communities, establishing full employment as the focus of economic policies, making a better use of available resources.
An Italian political philosopher, Antonio Gramsci, would say “To live means to be a partisan, to take side. Indifference is apathy, parasitism and cowardice, because what is done is not so much the result of the initiative of some, but of the absence of many”.

 

5.
Integrity of the tendering process is another parameter demanding our attention, with effective sanctions in case of law infringement. Corruption is a snake with many heads. We know this is a priority for the Chinese Government. Being successful against corruption requires suitable legal procedures, a cultural dimension and a Judiciary free to act, with a genuine commitment of the healthy side of our communities.
OBOR is targeting many areas. I wish here to stress Tourism, a key-domain in many countries touched by Belt and Road. In the future, more people will travel abroad, boosting mutual understanding, jobs creation and economic activity. Along the Silk Road there are 500 heritage sites. Cultural Tourism there is now restricted by poor transportation, visa requirements and scarce security. We need more information on places, projects and methods to bring millions of tourists to discover fascinating sites in unknown Asian localities.
China’s interest to reduce time and costs of transportation would benefit the whole world. For many, OBOR is motivated by China’s intent to support its companies, in the fields of commerce, construction equipment, machinery and others. A study on loan granted by China Development Bank and Ex-Im Bank of China in the last three years reveal that 70% of overseas credit was tied credit, requiring the purchase of goods and services with Chinese content. To certain extent this is understandable. Now, many governments and institutions will be involved in OBOR - such as AIIB, Brics Bank, ADB, WB, SCO, other Chinese and foreign banks. It will then be crucial to keep separate economics and politics and not supporting projects for political reasons, or favoring individual governments. Failure to make this distinction would have damaging effects: investments would not reap the expected returns and foreign support could vanish.
Some Chinese scholars have explained how, despite apparent similarities, OBOR is not China’s Marshall Plan. Chinese Authorities maintain that OBOR is informal, harmonious and inclusive, since any nation is free to join, whereas the Marshall Plan was centered in a clear political and security strategy. On the other hand, we know that no foreign policy is monolithic, and not all interests of a country can be enclosed in only one strategy. One thing is evident, however: even though OBOR understandably pursues the aim to raise the PRC international political profile, it is evident that economic benefits brought about by this initiative have to be valued and praised per se.

 

6.
Taking the risk to appear partisan, but I am not, I wish to stress one last point. A handful of gigantic groups (maybe thirty/forth oligopolies) with a second circle of a thousand others, heavily influence today the global economy, industry, food business, commerce, services and financial markets, with the aim to maximize their profit. In a picture dominated by financial logic, single individuals, small and medium sized companies are extremely weak: free market and fair competition only exists in the books or in the mind of conventional economists.
Although this setting is clearly not sustainable, some scholars believe that there is no choice. We could maybe enforce some minor social policies, but basically the dominance of those Transnational Corporations and the withdrawal of Governments in front of market globalization are unchangeable. The battle is supposed to be lost: farewell socialism, an outdated nineteenth-century utopia, and also farewell social-democracies, blamed to be unsuitable to promote growth. In the future there might be a globalized response, but today nothing can be done.
Other lines of thought think differently. The current situation is not socially workable for the majority of the world peoples, both in rich and emerging countries, a financial collapse is possible any moment.
A major paradox is that not even genuine reformist forces perceive the deep contradiction between the huge power of Financial Groups/Transnational Corporations and the fundamental principles of democracy. A slow deconstruction of democracy is taking place even in the EU, as it is today. Economic structures should be managed by governments, since we know (and the recent crisis is a clear proof of what I am saying) that the superior efficiency of private business against public management is largely a legend.
We should focus on social needs and small companies, and fighting oligopolies with the aim to establish a real fair competition environment. The only optimism, even when it is genuine, doesn’t not justify inaction. The domination of the financial capital is keeping economic growth low and might also become a risk for political stability.
 

7.
Finally, the dream of the Chinese leadership to build a harmonious society is fascinating and captures everybody’s aspiration to live happy. High recognition has to be given to the Chinese leadership for designing goals which are also written in the PRC history and the Constitution. I am sure OBOR will be a great step forward to achieve those goals.
Thank you everybody.



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