Has Britain initiated the beginning of the end of US hegemony?
Often what future historians will see as the most significant event of a period is buried under many other stories at the time it happens. Right now the battle against the Islamic State or the negotiations with Iran, the reelection of Netanyahu, or even the story of murderous millionaire occupy the front pages, but I would bet that in only a few years, Britain’s defying the USA and joining the Asian Infrastructure Investment Bank will be seen as much more important.
The following snippets will give you a pretty clear “story arc” of the British move:
The US has expressed concern over the UK’s bid to become a founding member of a Chinese-backed development bank. The UK is the first big Western economy to apply for membership of the Asian Infrastructure Investment Bank (AIIB). (…) the US sees the Chinese effort as a ploy to dilute US control of the banking system, and has persuaded regional allies such as Australia, South Korea and Japan to stay out of the bank. (…) “We think that it’s in the UK’s national interest,” said Mr Cameron’s spokesperson. —BBC
America’s sensitivity to the creation of banks such as AIIB is understandable. Rivalry between Washington and Beijing for global economic influence is intensifying. Since the end of the second world war, the US has been the dominant voice, partly thanks to the creation of the Washington-based World Bank and International Monetary Fund. China is now challenging the Bretton Woods set-up by creating financial bodies to help it gain greater political influence in the Asia-Pacific region and other parts of the world. (…) The US may want to stop the growth of these bodies. But its lacklustre stewardship of the Washington-based international financial institutions is one of the reasons rivals are proliferating. —Financial Times
France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution. (…) Australia, a key US ally in the Asia-Pacific region which had come under pressure from Washington to stay out of the new bank, has also said that it will now rethink that position. (…) South Korean media have reported that Seoul will also now rethink its decision not to join the AIIB. Japan, the US ally in the region that is most worried by China’s growing influence, is not expected to become a member. —Financial Times
Why is this so important?
To simplify: American hegemonic power is based on a tripod of arms, economy and narrative (media, academia etc.). The two most unquestionably powerful are arms and economy.
America, as we are constantly being told, has the most powerful armed forces in the history of the world. But somehow, except for Panama and Grenada, America’s wars don’t seem to turn out that well. The last two, Afghanistan and Iraq, have turned out so badly and so fatigued American public opinion that we are forced to ask Madeline Albright’s famous question, “What’s the point of having this superb military that you’re always talking about if we can’t use it?”
This takes us to the economy where America’s power has at its heart the dollar. The greenback is the currency in which most of the world’s commerce takes place… very, very simply put, the USA can very cheaply print as many dollars as it wants whenever it wants and everybody else has to use them to buy the things they need. Too good to be true? The Asian Infrastructure Investment Bank could mean the end of that.
This excellent snippet from Thailand’s “The Nation” will give you an idea of how much trouble the AIIB could mean for US power and the average American’s pocketbook:
Once the AIIB gets off the ground, it will become an international financial institution to be reckoned with, offering financing for infrastructure projects in yuan-denominated loans. This is the underlying reason for Washington’s concern over the creation of the AIIB. Allowing the yuan to flourish will hit the international standing of the US dollar as the world’s reserve currency of choice.
China, Russia and other BRICS countries are moving away from the dollar, preferring to trade among themselves in their own currencies. Not only will this reduce foreign exchange risks associated with the dollar, it will also promote the use of their own currencies. Washington cannot afford to let a new international foreign exchange regime come into being.
With a budget deficit of $1 trillion a year, the US needs to finance its debt with borrowing. If the dollar’s credibility is questionable, fewer and fewer countries and funds will be willing to become the US’s creditors by buying up US bonds. The dollar will be dumped. Interest rates will rise, hurting the economy and the financial markets. The chain reaction will bring another round of financial crisis. (…)
[W]e have come to a point where the US can no longer dictate global events on its own terms. The fact that its allies are deserting to join the AIIB reflects the waning of Washington’s influence. Its allies realize they will miss the boat if they fail to join the AIIB, because the growth opportunities are in Asia — not in Europe or the US, where structural problems have yet to be addressed.
And to top it off, using the AIIB, China will be able to finance the infrastructure that will unite Asia, Africa and Europe and very possibly isolate the USA with The New Silk Road.
In short: in only a few years the Communist Party of China, without firing a shot, has used the very tools of capitalism to reduce the power of the lords of modern capitalism.
Sun Tzu would be proud.
Crossposted from David Seaton’s News Links.
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