Meet the BRICS’ “New Development Bank”

Corbett • 09/29/2014 •

James Corbett
corbettreport.com
This article originally appeared in The Corbett Report Subscriber newsletter on August 23, 2014. To subscribe to the newsletter and become a member of The Corbett Report website, please sign up for a monthly or annual membership here.
Last week we attempted to dispel some of the confusion surrounding the World Bank and the IMF, how the two are differentiated, and what the World Bank actually does.
As you’ll recall, Bretton Woods architect John Maynard Keynes admitted that the confusion over the bodies was embedded in their names; the World Bank should rightly be referred to as a fund (for development projects) and the International Monetary Fund as a bank (to help countries cover balance of payment deficits and ensure financial stability). The World Bank itself is a body that ostensibly provides long-term low interest or no interest loans secured on the global bond market to fund sectoral reforms and infrastructure development projects in some of the poorest countries in the world.
As we saw last week, however, the Bank is used as a weapon by the economic hitmen identified by John Perkins and others, directing infrastructure development funds to crony corporations and forcing countries into debt obligations that they will be unable to meet. These impossible debt obligations are then used to give the Bank leverage over the developing world economically and geopolitically. What’s more, both the IMF and the World Bank have historically been controlled by the US and Europe, and clamors for reform in governance from the developing countries have fallen on deaf ears.
It is in the context of this IMF/World Bank stranglehold over the global financial architecture that we have to understand the stunning development that took place at the 6th BRICS (Brazil, Russia, India, China, South Africa) Summit in Fortaleza, Brazil last month: the creation of a New Development Bank (NDB) to compete with the World Bank in providing funds for infrastructure development to developing nations and the creation of a Contingency Reserve Arrangement (CRA) to compete with the IMF in providing liquidity protection to countries with balance of payment difficulties.
The development was by no means surprising: the idea for a BRICS development bank has been bandied about for years now and was written about in the pages of this newsletter extensively last year. Nor does it represent (at least at this point) a fundamental challenge to the World Bank or IMF’s dominance; neither the NDB’s $50 billion USD in subscribed capital nor the CRA’s $100 billion liquidity pool come close to the World Bank’s $232.8 billion in subscribed capital or the IMF’s $755 billion in liquidity ($1.4 trillion if you include emergency funds). Neither do they have the infrastructure yet in place to coordinate and deploy these funds, nor a track record of working with the world’s poorest countries to ensure that funds reach their intended targets and not the Swiss bank accounts of corrupt politicians and middlemen.
Still, there is something of a revolutionary feel to the obligatory pictures of the smiling BRICS leaders coming out of this year’s summit. This year the smiles do not seem quite as forced. Perhaps they even seem a little self-assured. It may be a baby step, but after all it is a step toward a world where the poorest countries do not have to turn cap in hand to the IMF or World Bank for financial aid.
But what are the implications of this for the developing countries themselves and the prospect of genuine development? What does this development say about the BRICS and their growing ambition on the world geopolitical stage? And where does this fit into the age-old banker quest for global government? To answer these questions, we must first examine the institutions in question.
The Basics
Under the terms of the Agreement signed by the BRICS leaders at Fortaleza, the New Development Bank’s mandate is to “mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.” To accomplish this goal they will “support public or private projects through loans, guarantees, equity participation and other financial instruments.” The initial subscribed capital of $50 billion will come from initial payments of $10 billion from each of the five BRICS members. Total authorized capital of the Bank will be $100 billion. Membership of the bank will be open to all members of the United Nations and each members’ voting power will be equal to its subscribed shares in the Bank’s capital stock. The Bank will be headquartered in Shanghai and its governance will consist of a Board of Governors, a Board of Directors and a President.
The Contingent Reserve Arrangement, meanwhile, “is a framework for the provision of support through liquidity and precautionary instruments in response to actual or potential short-term balance of payments pressures.” Its initial $100 billion in committed resources will come in tranches: 41% from China, 18% each from Russia, India and Brazil, and 5% from South Africa. Governance of the CRA will consist of a Governing Council including one Governor and one Alternate Governor appointed by each of the five parties and a Standing Committee consisting of one Director and one Alternate Director appointed by each party. The Arrangement’s two main instruments will be a liquidity instrument for providing funds in response to balance of payment problems and a precautionary instrument for permitting access to funds ahead of anticipated balance of payment problems.
A Global Power Struggle?
So what does this all mean? Is this the first salvo in the long-expected economic war between the developed world and the developing world? Does the creation of the NDB and the CRA mark the rise of the BRICS as a force on the world stage? Does it threaten the existing IMF/World Bank empire?
The agreements for both the NDB and the CRA take pains to point out that they are meant as a “complement [to] existing international monetary and financial arrangements” rather than as competition to them. And the World Bank has formally welcomed the announcement of the NDB, with World Bank President Jim Young Kim telling reporters at a recent press conference with Indian Prime Minister Modi “The only competition we have is with poverty” and “Any bank or any group of institutions that try to tackle the problem of infrastructure investment to fight poverty, we welcome.”
But behind the polite words and ‘we’re all working toward the same goal’ rhetoric is the cold fact that the developing world has been increasingly vocal about their interest in World Bank reform in recent years and specific complaints from the BRICS nations themselves over the strings that are inevitably attached to World Bank lending. It is also perhaps significant that all of the BRICS nations except China will be paying more into their capitalization of the NDB than they do to the World Bank.
Although much talk has been made about how the BRICS are attempting to subvert the dollar’s hegemony as the world reserve currency, that is not the case with these institutions, at least not at this point. All of the capitalization payments and fund commitments in the agreements for the NDB and CRA are explicitly denominated in ” the official currency of payment of the United States of America.”
The main competition that many are expecting from the NDB as opposed to the World Bank is that there are expected to be far fewer (if any) conditionalities attached to NDB lending. As we saw last week the Structural Adjustment Programs of the IMF and World Bank require a whole series of political and economic reforms dictated by Washington and its cronies before developing countries can qualify for development funds. Now members of globalist institutions like Matt Ferchen of the Carnegie Tsinghua Center for Global Policy are openly fretting about the possibility that NDB funding will undermine this structure: “China has this rhetoric in terms of its foreign policy and especially as it relates to China’s engagement with other developing countries, that China won’t interfere in other countries’ domestic politics, that China respects the domestic, economic and political systems of other countries, in a way that they want to be seen as different from the World Bank, the IMF, or countries like the United States.”
For those who understand that the IMF/World Bank system is and has been used to subjugate debtor nations and impose the will of the Western powers on those countries, this seems like a potentially transformative moment. Could it be that the BRICS nations are creating a global institution that will truly undermine the Washington consensus stranglehold over the global south? Are the BRICS creating a global institution we can get behind? Should we be happy about this potential NDB/CRA revolution?
‘Good’ Globalization vs. ‘Bad’ Globalization
Like with so many other situations, we must be careful not to fall into the trap of believing that the only alternatives that are being presented to us are the only alternatives that are possible. In this case, it seems that we are being presented with the choice between supporting a development paradigm led by the ‘bad’ globalists of the IMF/World Bank crowd that seek to control other countries through financing and the ‘good’ globalists who are selflessly looking to spur development for the good of humanity. This is just such a false choice.
First, the underlying assumption that the BRICS countries are doing what they’re doing out of some selfless love of humanity needs to be confronted head on. The BRICS countries in general, and China in particular (which is the strongest proponent of the anti-interventionist stance), have much to gain by offering no strings development loans. This was made clear by Gaddafi when he made the argument that China would beat out the US for control over Africa because it’s non-interventionist foreign policy was better at winning Africans hearts and minds. China is interested in securing African resources. It cannot challenge the US directly at its leverage-and-threats approach to gaining control of those resources, so it plays the good cop in the good cop / bad cop game. This allows it to create deep (and lucrative) ties with precisely those nations, such as Sudan, that the US is most interested in ‘reforming.’ It may be a mutually beneficial relationship, but let’s not kid ourselves that China is interested in building up Sudanese infrastructure out of sheer goodwill. Did China finance the construction of a $1.3 billion railway from Khartoum to Port Sudan because they care about Africans or because they care about establishing the infrastructure to service their 2 million ton oil terminal in the port?
Secondly, the idea that the BRICS are creating a ‘good’ globalist institution rests on the further assumption that, even if the current batch of BRICS leaders are benevolent and altruistic, that the next batch (or the one after that…) will be as well. The World Bank, too, started out as a humble institution making very limited loans for very specific projects. It wasn’t until Robert McNamara took the reins of the Bank in 1968 that it started to take on the characteristics that we recognize today. Similarly who is to say that the BRICS leaders (or their successors) won’t allow the potential power of being a global financing body go to their heads? Why should we trust that any sprawling globalist institution will act always and forever in the interests of the greater good?
No, the ‘good’ globalization / ‘bad’ globalization here seems like a ruse to further globalization. Whether the world comes to accept a greater reliance on and submission of sovereignty to globalist institutions led by the West or institutions led by the BRICS countries does not seem to be a genuine choice.
So what are the alternatives? Surely it is important to build up the infrastructure of the developing countries, isn’t it? Surely this can’t be accomplished without the massive resources of a World Bank or a New Development Bank, can it?
It should first of all be noted that the urge to assume that developing nations cannot possibly find solutions to their own infrastructure and development problems without the aid of the rich global power players is not only paternalistic and patronizing, but contra-indicated by the evidence at hand. What, precisely, has the last 50 years of World Bank/IMF intervention and “aid” to the developing world achieved, exactly? Is Argentina in a better position than it was before IMF intervention, or a worse one? Has sub-Saharan Africa improved its political and economic clout on the world stage as a result of its World Bank financing, or become even more subservient to the countries that have provided it those loans? Are the success stories of economies that have risen out of poverty like South Korea because of or despite IMF/World Bank meddling? The answers to these questions, all easily enough documentable, speak for themselves.
Also, it shows a profound lack of imagination to believe that funding can only come through mega-grants delivered by bodies with hundreds of billions of dollars at their disposal. In recent decades the concept of microcredit has transformed our understanding of what is possible in terms of funding business and enterprise in the developing world, and it is currently challenging assumptions that infrastructure like affordable housing and sanitation systems can only be provided by the “grant aid lottery” of the World Bank (or NDB). Local communities know best what local needs are and how local manpower, resources and services can be organized to meet those needs. Granting bodies in Washington or Shanghai cannot possibly be expected to have that type of knowledge, or expect that throwing dollars at these problems will achieve the same results as providing small-scale, goal driven aid for specific local projects created and run by local community organizations.
It is not a question of ‘good’ global banks vs. ‘bad’ global banks. It is global banks versus the people, as it always has been, and when we understand the situation from that perspective the sheen comes off of the ballyhoo surrounding the New Development Bank.
Whither the NDB?
Before anyone gets too carried away with speculation about the NDB and the CRA and their likely role on the world stage, it would be good to conduct a brief reality check. There was another announcement of another alternative development bank just a few short years ago that received a similar amount of coverage and hoopla at the time that turned out to be all talk and no action. Remember the Bank of the South? Neither do most of the people who wrote about it at the time, and yet it seemed like a major development when it occurred.
That the BRICS are serious about following through with the NDB and the CRA is not in doubt, but that they can keep these organizations together and working toward a unified vision is very much doubtful at this moment. Internal divisions within the BRICS delayed the creation of the bank for years and even now tensions continue between the members. Brazil and China, for example, remain locked in disputes over China’s economic relation to the South American country; Brazil accuses the rising dragon of plundering their resources and dumping cheap manufactured goods on the country in return. China and India have also butted heads over control of the NDB’s policies and vision, and there is ongoing concern about whether South Africa will be able to live up to its financial obligations in these institutions.
All of this being said, the bank is hoping to make its first loan in 2016. When that happens, there will be no doubt that we will be living in a different world. The question is whether it will be a better one.

THE GMO SCRAPBOOK, AND HONG KONG: DID THE GMO THING JUST BECOME GEOPOLITICS?

Posted on October 8, 2014 by Joseph P. Farrell • Filed Under: Alchemy, News • http://gizadeathstar.com/2014/10/gmo-scrapbook-hong-kong-gmo-thing-just-become-geopolitics/

Most readers her know I’ve been entertaining the hypothesis that eventually GMOs would become a geopolitical issue, and that the BRICSA nations would make it so, and in support of this, I’ve been blogging from time to time about Russian and/or Chinese moves to prohibit GMOs altogether while genuine long term scientific and environmental studies could be conducted (Russia), or certain specific targeted bans of GMO products (usually American) have occurred (China).
In China’s case, there’s yet another targeted GMO ban that recently was issued by Beijing:
China Rejects U.S. Hay Exports Due to Genetically Modified Alfalfa Contamination

“The Chinese used to be quite confident that their hay was GMO free, but all that is about to change. Hay exported to the country from the U.S. is currently in quarantine due to the detection of GMO traits, specifically of genetically modified alfalfa, according to a USDA spokesperson.
“This isn’t a singular occurrence, either. Last year, a Washington State grower’s hay was rejected after it tested positive for GMO alfalfa. This doesn’t sit well with China, since all imported hay is supposed to be GMO-free. If the trend continues, they could boycott all US grown hay completely. They aren’t willing to feed their livestock hay grown with Round Up Ready traits – yet for some reason, many US farmers still are.
“Chinese officials are already preparing to implement more stringent testing thresholds to keep the GM alfalfa out of their imports.”

This is following a by-now familiar pattern: China detects a GMO presence in certain products, and then issues a prohibition against that particular product, whereas, as we’ve also seen, Russia has been targeting the whole issue on “philosophical” principles.
But lately we’ve seen something else happening: first, we blogged recently about the general military exercises conducted by the Chinese military, and it was speculated by some sources that this could have been either in response to a coup attempt against Mr. Xi’s government, or a message by his government against the more “western-minded” banksters of Shanghai. Secondly, more recently we’ve see the explosion of the Hong Kong demonstrations, and Paul Craig Roberts has posted an article on his website by Tony Cartalucci that indicates that he is – like many others including this author – highly suspicious both of the timing and sweeping extent of these demonstrations, smelling the usual “covert operations hidden hand” behind them:
US Government Is Funding The Hong Kong “Student Protests”
And last but not least, some are now beginning to question Mr. Xi’s hold over the Chinese military itself:
China’s Military May Have Gone ‘Rogue’ After All
So what’s going on here?
Well, I suspect, as you probably do also, that China is now showing the first signs and symptoms of US-led and backed “nation-building” and “democracy seeding,” and it makes perfect sense, if only from the GMO-geopolitics point of view, though of course there are many other geopolitical and financial factors in play. After all, there’s not much else that America can sell to China; they certainly don’t need our technology or weapons, they have their own. We don’t manufacture much else, other than airplanes, and China and Boeing have been dancing a delicate ballet for years. So what it portends, I fear, is a growing opportunity for western covert operations against that country and its government.
But as I keep trying to warn people, and especially those insane psychopaths in Wall Street, London, and Washington: covert operations are a game that more than one country,and for that matter, more than one extraterritorial group or cult, can play…

The Bank Bailout and the Forbes 400

By Andre Damon

Global Research, October 08, 2014

World Socialist Web Site

Region: USA

Theme: Global Economy

Six years ago this past Friday, the US Congress passed the Emergency Economic Stabilization Act of 2008, which established the $700 billion Troubled Asset Relief Program, the first of the bank bailouts. It was followed by a series of Federal Reserve and Treasury programs that allocated some $7 trillion in free loans to the financial system.
The day after the passage of TARP, October 4, 2008, the World Socialist Web Site offered the following analysis:

“The [Bush] administration has invoked the worst economic crisis since the Great Depression in an attempt to terrorize the American people into accepting the greatest transfer of public resources to the financial elite in history…[The bailout] will facilitate an ever-greater concentration of wealth that can only produce a drastic deterioration of living conditions and the undermining of basic democratic rights.”

Six years later, not a word of this assessment needs to be revised, except for changing the future tense to the past.
The outcome of the past six years of government policy can be seen in the figures released last week by the business magazine Forbes, ranking the 400 wealthiest Americans. The report revealed that since 2009, the 400 richest people in the US have nearly doubled their net worth, to a shocking $2.9 trillion. This is nearly a fifth of the total value of all the goods and services produced in the United States in an entire year.
The accumulation of this vast wealth takes place under conditions not of general prosperity, but rather of an economic stagnation and falling living standards for the majority of the population. Since 2010, the median household income in the US has fallen by five percent.
This outcome is the intended result of the entire policy of the ruling class since the economic crash. From the beginning, the ruling class’s response, initiated under Bush and vastly expanded under Obama, was characterized by two interrelated aspects: the provision of unlimited funds to prop up the financial system—and with it the wealth of the financial oligarchy—to be paid for through sweeping attacks on social programs and the living standards of the working class.
Earlier this year, Timothy Geithner, the former Treasury Secretary who now heads a private equity firm, published his memoir, which makes clear that every single substantial policy question related to the financial crisis was decided solely from the standpoint of maximizing the most predatory profit interests of Wall Street.
According to Geithner, by September 2008 it became clear to the Bush administration and the Federal Reserve that every major US financial institution was insolvent, and would go bankrupt without government intervention. Under these circumstances, the Federal Reserve and Treasury allowed Lehman Brothers to collapse, a move that had the effect, to use a phrase recalled by Geithner, of “shock[ing] the political world into taking the crisis seriously.”
Following the collapse of Lehman, the Federal Reserve and Bush administration crafted TARP, which, amid broad popular opposition, was initially voted down in the House of Representatives before passing amid a lobbying campaign by the presidential candidates of both parties (Democrat Barack Obama and Republican John McCain).
After coming to office, the Obama administration has carried out a set of clear policies: the banks would get rescued, but their executives would remain in place, there would be no criminal prosecutions despite clear evidence of illegal activities, no “haircuts” for bank creditors and no meaningful restraints on executive pay.
The Obama administration’s actions in the aftermath of the 2008 crash were dictated by the same considerations as the bank bailout. In his own memoir, Neil Barofsky, the former inspector-general for TARP, noted that the Obama administration’s mortgage modification program, touted by the White House as a means to help homeowners avoid foreclosure, was in fact nothing more than “an aid to the banks, keeping the full flush of foreclosures from hitting the financial system all at the same time.”
Which brings us back to the Forbes 400. Beyond the total mass of wealth that the rich now control, the most salient fact revealed in the report is the manner in which this wealth has been, to use the word loosely, “earned.” As the magazine began its report, “Thanks to a buoyant stock market, the richest people in the US just keep getting richer.” A “buoyant stock market”—that is, through speculation on an historically unprecedented scale, aided and abetted by the government and the Federal Reserve.
Finance is increasingly dominant among America’s wealthy. While the finance and real estate sectors made up about 4.4 percent of the first Forbes 400 in 1982, they now make up 21 percent. Beyond those who derive their wealth immediately from the financial sector, the fortunes of billionaires in other sectors of the economy is increasingly based on share values. For example, Facebook CEO Mark Zuckerberg, currently 11th on the list with a net worth of $34.1 billion, had his wealth increase seventeen-fold from 2009 as a result of Facebook’s speculative initial public offering.
What is revealed in these figures is that the very processes that erupted in 2008 are continuing. The crash was itself rooted in the protracted crisis of American capitalism, characterized by the growth of financial parasitism proportionately with the decline of manufacturing and productive activity. Yet six years later, the big banks are bigger than ever, and even more dependent on speculation on Wall Street.
To resolve a problem, it is necessary to understand its cause. Yet the cause of all the great problems facing the working class, in the United States and internationally—soaring social inequality, the destruction of democratic rights, unending war that threatens to engulf the entire planet—is rooted fundamentally in the stranglehold of finance capital over all aspects of society.
The task of freeing society from the grip of the financial parasites is an existential question for mankind. This task can only be accomplished one way: through the building of a mass political movement of the international working class to expropriate the banks and major corporations, hold the financial criminals to account for their crimes, and reorganize society in the interest of social need, not private profit.

Monsanto Scandal Causes Reopening of US Investigation of GMO Wheat

By Christina Sarich

Global Research, October 07, 2014

Natural Society 6 October 2014

Region: USA

Theme: Biotechnology and GMO, Law and Justice

Last year, the U.S. Department of Agriculture (USDA) and the Animal and Plant Health Inspection Service (APHIS) agencies investigated the appearance of what appeared to be GE wheat on an Oregon farm, and concluded that it was an isolated incident. The investigation was closed after ‘exhausting all leads,’ but new GMO wheat has been detected at the Montana State University’s Southern Agricultural Research Center (SARC) in Huntley, Montana, where Monsanto and researchers grew GE wheat as part of field trials from 2000 to 2003.
The Oregon wheat was later suspected by environmentalists to be a development by Monsanto, meant to withstand the spraying of RoundUp. The APHIS found no evidence at that time that the GE wheat had been released into the market. Just this week, the agency is releasing its full findings on their investigation with personal information and confidential business information redacted.
This time; however, a new investigation will be opened to investigate regulatory compliance issues with the GE wheat found growing at the research facility in Montana. While this site was previously authorized for Monsanto to conduct field trials, the company is not supposed to be growing GM wheat or any other GM crop there now.
Furthermore, the GM wheat found growing there now has been genetically tested and is significantly different from the GE wheat found growing in Oregon last year.
Since the original field trials granted to Monsanto, the APHIS has not deregulated any GE wheat varieties. They are not to be for sale or in commercial production in the U.S.
During the Oregon farm GE wheat investigation, conducted over a period of ten months, 291 interviews were held with wheat growers, grain elevator operators, crop consultants, and wheat researchers. Thousands of pages of evidence were collected and carefully reviewed.
Also, 100 samples were collected from businesses that purchased and sold ‘certified’ seeds from the farm in Oregon, as well as harvested grain that was gathered from the grower. It was after researching this incident exhaustively that the APHIS concluded that the incident was a one-off. No one was sure how the GM wheat was found to be growing at the Oregon farm.
A copy of the 12,842 pages that comprise the complete report of investigation and evidence file is available on the APHIS website.
Montana Investigation
Though Monsanto’s initial GM wheat field tests were conducted under APHIS’ regulatory approval, they have no business growing GM wheat now. This is a serious breech of compliance, and as many have suspected, Monsanto has little regard for regulatory approval for their GM crop experiments, though they often receive it through political maneuvering and illegal campaign contributions nonetheless. The field trials were supposed to be a part of research conducted on the safety of GM crops, not a free pass to develop new wheat strains to sell to the unwitting public.
The APHIS claims that it is taking steps to make sure that other strains of GM wheat do not show up elsewhere in the U.S., and that they will inspect field trials planted in 2014. Additionally, they will remove plants that appear ‘as volunteer plants,’ meaning that they appeared later after an initial harvest, as plants sometimes do.
It is clear with this new Montana GM scandal that cross-breeding, the scarce but resilient GM plant that lasts after a crop has been cleared, as well as the insidious business habits of Monsanto are still threatening organic farmers’ fields and the right of the U.S. public to have GMO-free food.