Alan Beattie in Washington
June 14, 2011
Harold Macmillan, the prime minister who watched US power rise as the British empire crumbled, used to say that Britain would play ancient Greece to America’s Rome.
These days it looks as if Rome is declining too. The US finds it increasingly hard to drive forward its vision of international trade and economics over the objections of big emerging-market countries.
The Visigoths and the Vandals who sacked Rome and undermined its empire, though far more cultured and sophisticated than their popular reputation, were unable to replicate the Pax Romana order it had established. European territories previously under Roman rule fractured into an unstable array of weak kingdoms and embattled city-states. Similarly, the vacuum created today by the erosion of US hegemony and the turmoil in the eurozone is resulting in stasis rather than a new direction.
Even those trade officials most hermetically sealed in bureaucratic bubbles are finally accepting that the so-called “Doha round” of trade negotiations, which the US pushed to the launch pad 10 years ago, is expiring. New Delhi and Beijing have shown they are perfectly willing to collapse the talks rather than accede to demands from Washington.
China, with covering fire from other governments, has repulsed much of the US’s charge to force Beijing to liberalise its currency. Assuming that Christine Lagarde, the French finance minister, takes over the managing directorship of the International Monetary Fund , she will inherit a process of mutual economic assessment at the behest of the G20 to encourage global economic rebalancing. But recent history suggests it will do little to make China hasten the rise of the renminbi.
The potential influence of emerging markets is underlined by the sight of Ms Lagarde beetling round the developing world asking for votes. But those countries either collectively or individually have yet to give a coherent view of what they want in return.
Politically, they remain divided. Agustín Carstens, Ms Lagarde’s only challenger , has failed to unite the developing world behind him and seems resigned to setting down a marker for the future.
Emerging markets talk in general terms of increasing their power in the fund. Yet votes and executive board seats are already being shifted – admittedly painfully slowly – away from Europe towards middle-income countries. Many emerging markets would prefer to remove the US’s veto power over important decisions by cutting its share of the vote to below 15 per cent but no credible voting formula has been or will be devised to achieve that. China’s diplomatic efforts within the IMF in recent years have largely been negative, trying to get it to pipe down about the renminbi. Doha is dying but the emerging markets at the centre of the talks – India, China and Brazil – have not sketched a replacement.
True, the emerging markets will supply more top management in the international financial institutions: Justin Lin, the World Bank’s chief economist, and Zhu Min, adviser to the IMF managing director, are both Chinese. But that does not guarantee a change in policy direction. It is the realities of the world economy, rather than the nationality of management, that drives the ideology and purpose of such organisations.
This is evident over the road from the IMF at the World Bank. The US has long had a lock on the bank’s presidency, the counterpart of the traditional European claim on the IMF managing directorship. Back in the 1980s, when the US economy was more dominant and the bank was often the most significant source of finance for many low-income countries, the Reagan administration used it to export an aggressively deregulatory view of economic development.
These days, with developing countries able to tap a range of sources of money, particularly China, the bank’s discourse has shifted towards inclusiveness and policy eclecticism rather than privatising anything that moves. It is not clear what the US now gets out of running the World Bank.
As one G20 official says of the governance of global trade: “At the moment, the US cannot lead but nothing can happen without the US.” The age of Pax Americana is gradually passing but as yet there is no organised power rising to supplant it.