China’s creation of its own global bank shows that the United States has “lost its role as the underwriter of the global economic system,” according to former U.S. Treasury Secretary Lawrence Summers.
Since China launched the Asian Infrastructure Investment Bank (AIIB) in October 2014, more than 50 countries have signed up as founding members of what was conceived as an alternative to Western-dominated sources of credit such as the World Bank, the International Monetary Fund, and the Asian Development Bank.
The United States has refused to participate in the AIIB, citing concerns about the new institution’s governance and transparency standards. But in a posting on his website, Summers said the United States only had itself to blame for the formation of the bank.
“This failure of strategy and tactics [by Washington] was a long time coming, and it should lead to a comprehensive review of the US approach to global economics,” he wrote.
He cited in particular the U.S. Senate’s refusal to ratify an agreement on governance reform that would have doubled the resources available to the IMF by increasing capital contributions from emerging market countries.
“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,” Summers noted.
Pressures from the left, he argued, have led to pervasive restrictions on infrastructure projects financed through existing development banks, and, “With U.S. commitments unhonored and U.S.-backed policies blocking the kinds of finance other countries want to provide or receive through the existing institutions, the way was clear for China to establish the Asian Infrastructure Investment Bank.”
Two Georgetown University professors also criticized U.S. policy toward the bank in a column Monday for The Washington Post, warning that the U.S. “may end up cutting American investors off from the potential benefits of private investment in Asian infrastructure.”
“Asia, the United States — and for that matter, the whole world — would be better off if the United States were to participate in the AIIB,” Raj M. Desai and James Vreeland said.