If one needed any more proof of the new
world order emerging, it was on full display in March-end.
With the deadline looming for founders’
membership of the China-led Asian Infrastructure Investment Bank, Washington’s major
European allies rushed in ignoring its warnings. The most telling action was
that of the UK, once the co-architect with the US of the Bretton Woods system.
It scrambled to join the Chinese bank, explicitly designed to challenge the
World War II-era global financial architecture. Leaders in Washington were
stunned that their transatlantic “cousins” did not even consult them before
rushing to sign up with AIIB.
Ever since China announced the creation
of AIIB with its $50 billion initial investment, the US has expressed concerns
overs the absence of international standards of transparency, policies to
support the creditworthiness of borrowers and environmental sustainability. It
publicly worried that AIIB would weaken the institutions of the World Bank and
the IMF. Despite such concerns, many friends and allies — including India,
Singapore, the Philippines, Thailand — joined the bank. Britain, Germany,
France and Italy also rushed to sign up. An embarrassed Washington publicly
criticised London, expressing its misgivings “about a trend toward constant
accommodation of China”.
Washington should not have been surprised. Beijing’s
growing economic clout has been on display ever since the 2008 financial crisis
shook Western economies. The fact that China, along with fellow rising
economies India and Brazil, has been denied its due share of voting rights in
the IMF and leadership of the World Bank, has given it additional impetus to
seek its own avenues of influence. Beijing has emerged as a serial founder of
economic institutions as well as promoter of initiatives such as the
$41-billion BRICS development bank, the Central Asian Silk Road Belt and the
New Maritime Silk Road backed by a $40-billion fund. The launch of AIIB was generally
welcomed by Asian neighbours, largely starved of the large-scale capital needed
to build critical infrastructure.
In its early years, the Obama administration
had expressed a desire to rectify the disconnect between new economic realities
and the increasingly sclerotic system established at Bretton Woods. But its
ability to pursue such over-the horizon initiatives has been snuffed out by
stiff opposition from a Congress increasingly dominated by small-government, isolationist-leaning
Republicans. The US has thus been left, without even its closest allies, to
defend an outdated system that even it knows needs to radically reform. While
the politics in Washington has only permitted one policy direction — namely,
vetoing China — Beijing has steadily built its economic influence in Europe. In
doing so, it has successfully driven a wedge between the US and the European Union
as well as between European countries.
Even in Asia, where America’s allies
have cause for concern over Chinese assertiveness over airspace and the high
seas, there is limited faith in the US willingness to come to their aid. Many
who would normally count on the reliability of the US military deterrent to
keep China at bay have begun to hedge their bets. After initially staying away
from the Chinese sponsored AIIB, major American allies like Australia and South
Korea have hinted at changing their minds. Only Japan, which is facing direct
Chinese territorial challenges, has been steadfast in refusing to join the
bank.
The decision by the British and other
European countries to join China’s new bank may one day be seen as the last
straw on the back of the aging and beleaguered camel that is the post-war
economic system. With the western alliance seemingly in disarray, and China
consolidating its economic dominance with savvy new political maneuvering, a
New World Order may truly be upon us. Mindless partisan politics in Washington
and political opportunism in Europe have handed China the leadership crown on a
platter.
The author is
editor-in-chief of YaleGlobal Online, published by the MacMillan Center, Yale
University (This story was published in BW |
Businessworld Issue Dated 20-03-2015)
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