Patrick Barron writes:
Recently a friend sent me the updated Wikipedia link about the newly formed Asian Infrastructure Investment Bank that has been in the news so much, mostly gathering glowing endorsements that this is a great undertaking.
OK. I may be the only person who is critical of this so-called bank. After all, every nation seems to be jumping on this bandwagon, except the US and Japan. And that’s my problem with the bank--that it is funded by governments and not private capital. Now maybe the US and Japan are not “investing” in the new bank for the wrong reasons, such as the fact that they won’t be able to make all the decisions. Perhaps that is why so many of the world’s governments are funding this new bank--they want to make all the decisions. But that doesn’t mean that forming a new bank is a wise decision. I am also critical of the World Bank, IMF, and Asia Development Bank. These so-called banks are funded by governments who get their funds either through coercively obtained taxes or money printing. Investment decisions will be driven by political considerations, because those who make the investment decisions are not putting their own money at risk or that of private investors to whom they are answerable. Governments cannot make rational decisions about investment, because they do not possess a hierarchy of spending preferences that can be formed only from actually owning investment resources personally. So why does anyone believe that another government funded investment bank can guide development better than private individuals? Furthermore, the so-called experts cannot know that Asia “needs” $8 trillion in new and better infrastructure. This is a meaningless statement, because “needs” is a subjective term. (I’ve been trying to convince my wife that I “need” a new set of golf clubs, but she is rightly skeptical.)
Here’s my prediction: the AIIB will turn into just another socialist and crony capitalist boondoggle, enriching political elites and their friends while funding projects that lose money. Can anyone say “Chinese ghost city”?
I would welcome responses that take me to task for being so critical. Maybe I’m missing something.
