Can the Belt and Road mould the 21st Century?

By Dan Steinbock        

Last weekend saw Beijing flooded with almost 30 heads of state and government leaders, 1,500 delegates from over 130 nations, and over 70 international organisations for the Belt and Road Forum for International Cooperation (BRF).

A new era of globalisation

Despite the lingering forces of globalisation in the advanced world, the Forum reflected on renewed commitments to a more inclusive form of globalisation, particularly by the emerging and developing countries. By 2050, their contribution to the global GDP is expected to increase from 68 percent to 80 percent.

The Forum precipitates huge investments in new roads, railways, and ports while facilitating access to vital capital, goods, and services. These are especially for economies that benefited little from the postwar globalisation. The investment in infrastructure is likely to accelerate industrialisation and growth opportunities in nations where living standards remain low but the growth potential is high.

Walking a trodden path to economic development

In the West, the One Belt One Road (OBOR) is still portrayed as a new plan. Yet, President Xi Jinping raised the initiative of jointly building the Silk Road Economic Belt and the 21^st Century Maritime Silk Road in fall of 2013. If the original belt reflected the ancient world economy until the Italian Renaissance, the OBOR includes countries on the original Silk Road through Central Asia, West Asia, the Middle East and Europe. It also features a maritime road that links China’s port facilities with African coast, through the Suez Canal into the Mediterranean. The OBOR has the potential to redirect domestic overcapacity and capital for regional infrastructure development to improve trade and relations. It will particularly benefit Southeast Asia, Central Asia and Europe—and over time across Americas and Sub-Saharan Africa.

A new Marshall Plan? 

The OBOR has been compared with the postwar Marshall Plan, which was designed to support the European recovery and to insulate the Soviet Union. There are parallels, but also major differences. The Marshall Plan was created to help rebuild economies in Western Europe for four years beginning in April 1948. While there is no consensus on exact amounts, the cumulative aid may have totalled to $13 billion (some $130 billion in 2016 dollar value). These efforts pale in comparison with the OBOR. The cumulative investments are currently anticipated at $4 trillion to $8 trillion, depending on timeline and scenario estimates. Also, unlike the Marshall Plan, the OBOR does not predicate participation on membership or tacit support of military alliances. It is focused on 21st-century economic development, not on the 20th-century Cold War.

The huge expenses of geopolitics

Historically, almost 75 percent of the total aid of the Marshall Plan went to just five countries: the UK, France, West Germany, Italy, and the Netherlands. These countries became NATO’s core members over time. Today, NATO still accounts for over 70 percent of all military spending in the world (US 38%, non-US NATO 32%). However, friction about NATO financing by members reflects underlying pressures among the founding members.

Much has been made about the humanitarian aid by the West, particularly by the US and Europe. However, this must be seen in context. In 2016, world military expenditure is estimated to have been $1,686 billion, according to SIPRI research. In turn, international humanitarian assistance reached a record high of $28 billion in 2015, according to the most recent Global Humanitarian Assistance Report. In brief, the West-led humanitarian assistance is less than 2 percent of world military expenditures, which is led by the NATO. That is untenable over time, especially as more than 90 percent of global humanitarian aid goes to long and medium term recipients.

Need for global cooperation

Unlike advanced economies, emerging and developing nations have neither the ability nor willingness to over-invest in military spending. In per capita terms, China ($156 per person), India ($42), and even Russia ($481) invest a lot less than the US ($1,885), or major European economies ($500-$860) in military spending. Moreover, China does not predicate entry to the OBOR on membership in military alliances, as the US once did. This is vital.

When NATO’s rearmament replaced economic development as the West’s primary goal in the postwar era and the Cold War divided the world, instability and economic volatility surpassed stability and economic growth in the global agenda. That benefited mainly a few advanced economies but not the decolonizing nations. They were penalised by costly conflicts exported to the Third World as a direct result of the Cold War.

It is these historical failures in economic development that the OBOR has potential to alleviate over time.  Its strategy includes renewed global cooperation and the rise of more inclusive multilateral inter-governmental development banks. It also encompasses new and massive infrastructure initiatives in a number of pivotal emerging and developing economies.

Through these initiatives, the Belt and Road have the potential to change the 21^st century for the better.

Dan Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore).

Featured Image credits: Flickr