Paul, O’Malley, Webb and the century ahead

Kentucky Sen. Rand Paul (R-Ky.) announced his candidacy for president today. Former Virginia Sen. Jim Webb (D) and former Maryland Gov. Martin O’Malley (D) head to Iowa. But today, they face a world that didn’t exist even a month ago. The contours of history have changed dramatically due to the rise of the Asian Infrastructure Investment Bank. As Lawrence Summers, secretary of the Treasury under President Clinton and adviser to President Obama wrote Monday in The Washington Post: “This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system.”

The consequences of this will be vast and far reaching. Three are suggested already.

The return of Britain as a world moral authority: The rush of world nations from Australia to the UAE states, Russia and Israel to seek membership in the new China bank first suggests the singular rise of China as a world power. But it should not be overlooked that Britain instigated and led the rush and Britain’s status is greatly enhanced by this action. The play was not accidental; it was orchestrated in a genius moment of diplomacy by Prime Minister David Cameron and Chancellor of the Exchequer George Osborne, in opposition to America’s visceral demands that they stay in line, and even in opposition to their own foreign office.

The rise of China: As Summers continued:

[T]there have been any number of periods of frustration for the United States before and multiple times when U.S. behavior was hardly multilateralist, such as the 1971 Nixon shock ending the convertibility of the dollar into gold. But I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out.

Other commentators in the economic press like Kishore Mahbubani of the Lee Kuan Yew School of Public Policy have offered perspective: “Some events are epochal. The decision by Great Britain to join the Asian Infrastructure Investment Bank was one such event. It may have heralded the end of the American century and the arrival of the Asian century.”

{mosads}Three of the G7 joined Britain’s rush to the China bank: France, Italy and Germany. The G7 is now essentially a G2 made up of the U.S. and Japan. A G3 if you include Canada, which has so far made no commitment. This will put a crimp in the Obama administration’s “pivot” to Asia.

The “forever agreement” on Iran is history already: Last week was key, in the great discussion with Energy Secretary Ernest Moniz of the deal with Iran. This week, in light of the rising China bank, we can project the rise of the renminbi and the decline of the dollar on which sanctions would be based.

“The U.S. trump card has been its unique grip on the global banking and payments system, but China’s success in recruiting European allies to join its Asian Infrastructure [Investment] Bank demonstrated that Asian alternatives to U.S.[-]dominated [W]estern financial institutions will soon emerge,” writes Peter Morici, an economist and business professor at the University of Maryland.

My guess is that it will hang on much like the Oslo Accords, for a decade, a generation or so, while they (the world) think the Americans are still watching. Then it will disappear, forgotten, like Kafka’s Hunger Artist, when it looks like we’ve become preoccupied elsewhere.

Quigley is a prize-winning writer who has worked more than 35 years as a book and magazine editor, political commentator and reviewer. For 20 years he has been an amateur farmer, raising Tunis sheep and organic vegetables. He lives in New Hampshire with his wife and four children. Contact him at quigley1985@gmail.com.