At the G-20 meeting, the administration will unveil its plans to counter growing Chinese influence with a new approach to economic development that prioritizes climate action and inclusive growth. But countries burned by decades of Western-imposed austerity aren’t convinced.
President Joe Biden speaks during a visit at the Port of Baltimore, Nov. 10, 2021. | Susan Walsh/AP PhotoPresident Joe Biden heads to India this week with a rare task for U.S. leaders — courting the developing world.
Biden’s plan is to buy them off. The administration says the U.S. and other Western nations — not to mention their financial institutions — need to boost their financing of infrastructure projects in the developing world. That, they hope, will provide a down payment to keep those nations from floating further toward Beijing’s orbit, even in the absence of traditional trade negotiations that Biden has eschewed since taking office.
A Chinese laborer works at a construction site, part of a Chinese-funded project for Port City, in Colombo. For over a decade, Chinese officials have financed infrastructure and development projects in over 130 nations around the world. | Ishara S. Kodikara/AFP “Seeing that lack of support for Ukraine and lack of opposition to Russia in [developing nations] has really crystallized in the administration’s minds on the need to be out there quite aggressively, working to build relationships,” said Harrell, who served on the NSC during the start of Russia’s war, before stepping down last fall.
But economists and diplomats from developing nations surveyed by POLITICO expressed deep skepticism about U.S. intentions. Many critics point out that Western funding — even after Biden’s boost — won’t come near the trillions of dollars that developing nations need to deal with climate change.
Neoliberal economic policies led to deals that largely focused on lowering tariffs and trade barriers in both the U.S. and abroad. | David McNew/Getty Imagesiden’s new trade and development initiatives seek to replace a half-century of what scholars call neoliberal economic policies — austerity, lowering trade barriers and free movement of capital across borders.
“The story from the ‘80s and ‘90s was that there was a real view and a trend in the World Bank in the IMF to focus on things like privatization, on things like fiscal austerity-type measures, even at the cost of social programs,” said a senior White House economic official, granted anonymity to discuss policy plans. “It was a real challenge to these institutions because you were getting to the point where countries didn’t want to borrow from the institutions because of those types of conditions.
Now, with the Belt and Road Initiative spanning over 130 nations, even American lawmakers who supported neoliberal policies for decades are wondering if those conditions have backfired. “We’ve had a real turn,” said the senior White House official. “I think the way that the IMF approaches those programs and the way the World Bank approaches those programs are really different from the way that they were in the ‘90s.”
The approach involves “providing some public sector money to bring down the cost and risk of private-sector lending,” said the White House official. “So that’s definitely an element of our strategy, but it’s not the only element.” To do that, Biden hopes to overhaul the multilateral development institutions like the World Bank. As the bank’s largest shareholder, the U.S. has an outsized influence in the organization, though it also includes input from Europe and China — which is the third-largest shareholder of the bank.
“We helped lead a leadership change at the World Bank and installed a new president, Ajay Banga, who is very committed to [Biden’s] agenda and dedicated to restoring the key institutions when it comes to delivering to countries around the world,” said the senior White House official. Critics worry that Biden’s new initiatives to re-engage the developing world won’t look much different from the past. | Charlie Neibergall/AP Photoiden’s push to re-engage the developing world faces a number of pitfalls — from questions of its scale to its sincerity.
Even if the funds do materialize, there’s doubt about whether the Biden de-risking agenda can really help other nations industrialize. The agenda broadly does not include plans to transfer green energy technologies to developing nations, said Gabor, and would still leave them as consumers of Western financing and tech, rather than developing their own.
“We want production to be done in the Philippines,” said Alfredo Pascual, the Philippines’ secretary of trade and industry, who told POLITICO at meetings of the Indo-Pacific Economic Framework in June that he wants to produce and export finished products, not just raw materials for Western factories to use.
Many critics also worry that Biden’s new development initiatives won’t look much different from the past. Even as they acknowledge the failure of austerity policies linked to previous World Bank and IMF programs, the administration stresses that new projects will still have many stipulations for receiving nations on topics like anti-corruption, transparency and other governance issues.
In Pakistan, the government recently cut fuel subsidies in an attempt to secure an IMF bailout. | Asif Hassan/AFP
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