Summers: US Might Just Have 'Lost Role as Underwriter of Global Economic System'
"This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system," he writes in The Washington Post.
"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." He was referring to the Asian Infrastructure and Investment Bank.
"Political pressures from all sides in the United States have rendered the global economic architecture increasingly dysfunctional," Summers states.
Conservatives have blocked International Monetary Fund governance reforms, and liberals have hampered infrastructure projects financed through the existing development banks, he explains.
"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 (AIIB)," Summers writes.
Two important solutions in Summers' eyes are bipartisanship and a focus on the middle class.
"As long as one of our major parties is opposed to essentially all trade agreements and the other is resistant to funding international organizations, the United States will not be in a position to shape the global economic system," he notes.
As for the AIIB, Ambrose Evans-Pritchard, international business editor of The Daily Telegraph, says the U.S. government's effort to torpedo it is a major mistake.
"The U.S. Treasury's attempt to cripple the AIIB before it gets off the ground is clearly intended to head off China's ascendancy as a rival financial superpower, whatever the faux-pieties from Washington about standards of governance," he writes.
U.S. officials say the bank must meet the same governance standards as other multilateral lending institutions, such as the World Bank and the Asian Development Bank.
"Such a policy is misguided at every level, evidence of what can go wrong when a lame-duck president defers to posturing amateurs in Congress on delicate matters of global geo-strategy."
The U.S. has forced allies to make a choice between ourselves and China, "and has ended up losing almost everybody. Germany, France and Italy are joining. Australia and South Korea may follow soon. The AIIB is exactly what the world needs," Evans-Pritchard explains.