Was the past month the beginning of the end of American economic hegemony?
According to former Treasury Secretary Larry Summers, it may have been.
In an op-ed published Sunday in The Financial Times — with the headline “Time US leadership woke up to new economic era” — Summers argues the U.S. government has been failing miserably at managing and benefiting from the rise of economic powers such as India, China, and Brazil. His essay excoriates the U.S. government's failure to ratify changes to the International Monetary Fund, which would increase funding for the organization and shift voting power away from the U.S. in favor of those rising economic powers.
These proposals have been under consideration since the financial crisis, and Congress has consistently blocked them, Summers writes:
Largely because of resistance from the right, the U.S. stands alone in the world in failing to approve the International Monetary Fund governance reforms that Washington itself pushed for in 2009. By supplementing IMF resources, this change would have bolstered confidence in the global economy. More important, it would come closer to giving countries such as China and India a share of IMF votes commensurate with their new economic heft.
Meanwhile, pressures from the left have led to pervasive restrictions on infrastructure projects financed through existing development banks, which consequently have receded as funders, even as many developing countries now see infrastructure finance as their principal external funding need.
The U.S. refusing to get its act together has led to the Chinese successfully convincing some of the U.S.'s closest allies, such as the United Kingdom and Australia, to join the Asian Development Bank it launched last year. Summers sees this as a clear blow to U.S. power across the globe. One response should be, as others experts have argued, to sign the Trans-Pacific Partnership, a free trade agreement the U.S. is negotiating with Pacific nations.